Consumer defensive stock to buy in June: Dollar General

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on May 28, 2021
  • Shares of Dollar General on Thursday gained to trade at $206 before pulling back late on to $204.
  • DG reported its fiscal first-quarter 2021 results on Thursday beating expectations on revenue and earnings.
  • The rebound in DG stock looks exciting with earnings growth expected to continue through the rest of 2021.

Dollar General Corp (NYSE:DG) on Thursday posted better than expected results sparking a price gap to $206 before closing just above $204. DG stock is down more than 5% over the past six months and investors should take advantage of the weakness and buy shares at current levels.

Key highlights from DG’s fiscal first quarter

In the company’s most recent quarterly results, Dollar General posted earnings per share of $2.82 up 10% Y/Y. Analysts were expecting EPS of about $2.20. Revenue was relatively unchanged, edging lower 0.6% to $8.4 billion. This was still better than the consensus estimate of about $8.28 billion. The company kept its quarterly dividend unchanged at $0.42 per share, which equates to a yield of about $0.82%.

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Dollar General CEO Todd Vasos said that the company was happy with the results calling it a strong start to the year.

We are pleased with our strong start to fiscal 2021, and I want to thank our associates for their unwavering commitment to supporting our customers, communities, and each other.

Despite Thursday’s rebound, shares of Dollar General continue to trade at an attractive P/E ratio of 19.25. The company sees continued growth in the coming quarters, which could boost the current valuation multiples. Vasos said in the earnings statement,

Looking ahead, we are excited about our plans and believe we are well-positioned to continue delivering long-term sustainable growth and value for our shareholders

Source – TradingView

Technical overview

Technically, DG stock appears to have recently bounced off a key support level at around $198. The stock extended gains to the 100-hour moving average which triggered Thursday’s late pullback. But DG remains several levels below this month’s highs of $222 reached on May 10.

This creates some exciting profit opportunities to look forward to. The bulls will target short-term profits at around the key resistance levels at $211 and $216. Key support levels can be found at $198 and $192.

Bottom line: Buy DG stock on the rebound

Shares of Dollar General appear to be bouncing back from the 2-week plunge experienced between May 10 and May 24. Thursday’s Q1 earnings could provide the boost needed to push the stock towards the current monthly highs of $222. 

Dollar General looks set to maintain the current recovery as the world returns to normalcy. The company CEO promised sustainable long-term growth which should help drive the price higher. This makes DG stock one of the best consumer defensive stocks to buy in June.

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