Dollar Tree, Inc. (NASDAQ:DLTR) received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$107 at one point, and dropping to the lows of US$63.56. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Dollar Tree's current trading price of US$66.26 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Dollar Tree's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Dollar Tree Still Cheap?
Dollar Tree appears to be overvalued by 22% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$66.26 on the market compared to our intrinsic value of $54.37. Not the best news for investors looking to buy! In addition to this, it seems like Dollar Tree's share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Dollar Tree look like?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted revenue growth of 8.7% expected over the next couple of years, growth doesn't seem like a key driver for a buy decision for Dollar Tree, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in DLTR's future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DLTR should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping an eye on DLTR for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the positive outlook means it's worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Dollar Tree, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Dollar Tree and you'll want to know about this.
If you are no longer interested in Dollar Tree, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
