DLTR Dropped 19% In A Month. Have You Fully Evaluated The Risk?
Dollar Tree (DLTR) stock is down 18.9% in 21 trading days. Already own the stock? You might want to consider holding it. Planning to buy? This might be your opportunity. Consider the following data:
- Size: A $19 Bil company with $12 Bil in revenue currently trading at $90.32.
- Fundamentals: Last 12 month revenue growth of 13.6% and operating margin of 12.3%.
- Liquidity: Has Debt to Equity ratio of 0.39 and Cash to Assets ratio of 0.05
- Valuation: Currently trading at P/E multiple of -6.4 and P/EBIT multiple of 12.1
- Has one instance since 2010 where it dipped >30% in < 30 days and subsequently returned 51.5% within a year. See DLTR Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for DLTR, see Buy or Sell DLTR Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and DLTR drops another 20-30% to $63 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into Dollar Tree (DLTR) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
Below are the details, but before that, as a quick background: DLTR operates fixed-price and discount retail stores offering general merchandise and consumable products through two main segments.
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2022 Inflation Shock
- DLTR stock fell 40.5% from a high of $174.08 on 20 April 2022 to $103.64 on 3 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $150.02 on 7 March 2024 , and currently trades at $90.32
| DLTR | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -40.5% | -25.4% |
| Time to Full Recovery | Not Fully Recovered days | 464 days |
2020 Covid Pandemic
- DLTR stock fell 30.3% from a high of $94.05 on 1 January 2020 to $65.57 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 28 May 2020
| DLTR | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -30.3% | -33.9% |
| Time to Full Recovery | 71 days | 148 days |
2018 Correction
- DLTR stock fell 31.7% from a high of $116.35 on 29 January 2018 to $79.51 on 11 October 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 15 October 2019
| DLTR | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -31.7% | -19.8% |
| Time to Full Recovery | 369 days | 120 days |
2008 Global Financial Crisis
- DLTR stock fell 53.3% from a high of $15.19 on 6 June 2007 to $7.10 on 15 January 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 2 June 2009
| DLTR | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -53.3% | -56.8% |
| Time to Full Recovery | 504 days | 1480 days |
Worried that DLTR could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.