Dollar General (DG) shares have seen a noticeable shift lately, catching the attention of investors curious about what might be driving the move. Recent price action, together with steady revenue growth, has prompted fresh looks at valuation.

Zooming out, the stock's year-to-date share price return stands at an impressive 36.96%, which suggests that momentum has picked up again after a rough patch over the last few years. While the one-year total shareholder return is a robust 31.10%, longer-term holders are still well below water. This indicates that the recent uptrend is working to repair earlier damage rather than build on historic highs.

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With shares bouncing back and revenue on the rise, is Dollar General currently trading below its real worth? Or has all the good news already been factored in, leaving investors to wonder if there is true upside left?

Most Popular Narrative: 13.8% Undervalued

Dollar General's widely followed narrative places a fair value of $120.11 on the shares, a solid premium to the most recent closing price of $103.58. Rather than seeing the recent rally as overdone, this viewpoint suggests the stock still offers upside that has not yet been fully realized.

Rapid scaling of digital initiatives, including same-day delivery partnerships (DoorDash, Uber Eats), in-house DG delivery, and the DG Media Network, positions Dollar General to capture incremental market share and drive higher-margin omni-channel revenue streams. This could boost both sales and earnings over the long term.

What does the future hold for Dollar General’s bottom line? Big assumptions on faster earnings growth, better margins, and a re-rating that rivals industry leaders are built in. Craving the details that fuel this fair value? The narrative’s quantitative targets might surprise you. Find out what is behind the optimism and see if the numbers add up.

Result: Fair Value of $120.11 (UNDERVALUED)

However, rising competition among discount retailers and slower digital progress could undermine long-term growth if Dollar General cannot keep pace with evolving consumer trends.

Another View: The Market's Multiple Tells a Different Story

While many see Dollar General as undervalued, a closer look at its price-to-earnings ratio suggests a more cautionary view. The current ratio sits at 19.1x, almost identical to its peer average. However, it is noticeably below the US Consumer Retailing industry average of 21.2x and well under the fair ratio of 22.5x. This means the market is pricing Dollar General conservatively, possibly signaling skepticism about its ability to outperform rivals or return to stronger growth. Does this restraint mask an opportunity investors are missing, or are the risks still underestimated?

Build Your Own Dollar General Narrative

If the prevailing stories do not line up with your own perspective, take a hands-on approach and tailor your own narrative using the latest data in just minutes. Do it your way

A great starting point for your Dollar General research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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.