This Stock Is Beating the Market in 2025 yet Still Looks Surprisingly Cheap

Dollar General is having a terrific year: Its shares are outperforming the broad US stock market 2-to-1 so far in 2025. Yet despite that rally, Dollar General stock is still trading 13% below our $117 fair value estimate. This stock to buy has more going for it than just its price, though. We think Dollar General has dug a narrow economic moat, as its store density provides a competitive edge even amid intense retail competition. And results this year have been solid, thanks to the retailer’s attractive price points, strong merchandising, and store revamps. Dollar General is one of Morningstar Chief US Market Strategist Dave Sekera’s 3 Stocks to Buy Before October Ends.

Dollar General’s more than 20,000 small-box locations make the retailer an omnipresent force in rural communities that lack national retail chains. These stores provide low-income households with a convenient fill-in shopping destination and reasonable price points on products, which we view as the crux of their value proposition. Since thinly populated and less affluent towns cannot economically support an abundance of retailers, Dollar General thrives by leaning into areas with minimal competition. Furthermore, its impressive scale and proximity to consumers, product mix that is 80% consumables, and small basket size (usually around $15) help insulate the retailer from e-commerce threats.

Key Morningstar Metrics for Dollar General

• Fair Value Estimate: $117
• Star Rating: 4 Stars
• Economic Moat Rating: Narrow
• Uncertainty Rating: Medium

Economic Moat Rating

Dollar General has a narrow economic moat, in our view. Its dense store network and proximity to households in rural communities across the US result in a location advantage. The retailer enters seemingly unattractive markets that typically serve as deterrents to heavy competition. This has allowed it to solidify itself as the preeminent retailer in small towns with few shopping alternatives. With its 20,000-plus locations, we believe Dollar General is able to hold down its distribution costs by better leveraging its product delivery routes (from distribution centers to point of sale) compared with local grocery and convenience stores—a necessity when operating in rural areas. We also believe the company has a cost advantage over competing dollar stores due to its superior scale on the top line and its store locations.

Read more about Dollar General’s moat rating.

Fair Value Estimate for Dollar General Stock

Our fair value estimate is $117 per share. For 2025, we expect 3.7% sales growth and earnings per share of $5.42, both in line with the company’s outlook. In the longer term, we expect Dollar General to post low- to mid-single-digit top-line growth, driven by 2%-3% same-store sales growth and modest store expansion. We forecast Dollar General to expand its existing footprint from 20,000 stores to around 25,000 by the end of our 10-year forecast, equating to average annual growth of about 2%. We expect profitability to remain compressed in the near term as the retailer seeks to normalize its inventory levels and same-store sales growth moderates, limiting its ability to leverage selling, general, and administrative costs. We don’t forecast operating margin to reach 6.0% until fiscal 2029 and 6.5% until fiscal 2030.

Read more about Dollar General’s fair value estimate.

Risk and Uncertainty

Dollar General operates in a cutthroat retail industry with competition from convenience stores, mass merchandisers, hard discounters, and pure grocers. The continued expansion of competing retail channels that offer low prices and a comprehensive product assortment is a formidable risk, particularly from discounters that have established a lucrative small-box format. Meanwhile, larger retailers like Walmart and Kroger have shifted their attention to digital penetration and omnichannel fulfillment, where we believe Dollar General lacks a compelling value proposition. We expect Dollar General will incur some margin pressure if competing retailers aggressively infringe upon its rural turf. The company’s expansion plans also provide some uncertainty.

Read more about Dollar General’s risk and uncertainty.

Dollar General Bulls Say

• Dollar General is insulated from intense retail competition by its positioning in thinly populated rural towns, which are largely unattractive for most competing retail banners.
• Dollar General’s low prices on singular items make its stores a prime location for stretched consumers, irrespective of the economic backdrop.
• An expanding assortment of fresh food and produce positions the company to capture a larger wallet share from existing customers.

Dollar General Bears Say

• Dollar General, Dollar Tree, and Family Dollar together account for over 37,000 storefronts. This crowded footprint could weigh on opportunities to drive growth via store expansion.
• Dollar General’s margins are likely to be pressured by reinvestments in labor and the existing store base.
• The new pOpshelf concept is likely to weigh on Dollar General’s returns on invested capital in future years because it’s largely unproven and lacks a competitive advantage.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of Oct. 28, 2025, close unless otherwise noted.