Dollar Tree Stock Jump Looks Great, But How Secure Is That Gain?

Dollar Tree (DLTR) stock is up 27.2% in 21 trading days. The rally reflects optimism from its multi-price shift, strong Q3, and new shoppers, but such moves invite a tougher question: is DLTR truly resilient when markets reverse, given margin risks?

Before judging its downturn reslience, let’s look at where Dollar Tree stands today.

• Size: Dollar Tree is a $27 Bil company with $19 Bil in revenue currently trading at $131.17.
• Fundamentals: Last 12 month revenue growth of 156.4% and operating margin of 7.9%.
• Liquidity: Has Debt to Equity ratio of 0.4 and Cash to Assets ratio of 0.04
• Valuation: Dollar Tree stock is currently trading at P/E multiple of -9.1 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.

These metrics point to a Moderate operational performance, alongside Moderate valuation – making the stock Fairly Priced. For details, see Buy or Sell DLTR Stock

That brings us to the key consideration for investors chasing this rally: how resilient is DLTR stock if markets turn south? This is where our downturn resilience framework comes in. Suppose DLTR stock falls 20-30% to $92 – can investors comfortably hold on? Turns out, the stock saw an impact slightly worse than the S&P 500 index during various economic downturns, based on (a) how much the stock fell and, (b) how quickly it recovered. Below, we dive deeper into each such downturn.

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 $131.17

 
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

 
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

 
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

 
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