Dollar Tree (DLTR)
Retail de descuento
After selling Family Dollar, Dollar Tree became a standalone discount chain with 24% return on capital, buying back shares without paying a dividend; at market price the base case returns +7% annually and today It trades close to intrinsic value, far from the required margin of safety.
- Price
- $133.16
- Intrinsic value (5y, base)
- $187
- Total annual return (5y)
- 7.0%
- Status (nominal)
- Fairly valued
- Margin of safety
- +11%
The essentials
- Comparable sales +5.3% in FY2025 and +3.5% in the first quarter of FY2026, with average ticket as the main driver and traffic negative
- Consolidated business following the sale of Family Dollar (Jul-2025): ~9,300 stores in the US and Canada under a single operating brand
- Cash returned via buybacks (no dividend): US$1.6bn in FY2025 and US$595M in the first quarter of FY2026
- FY2026 guidance (revenue US$20.5-20.7bn, adjusted EPS US$6.70-7.10) anchors the year 1 projection
Intrinsic value — two valuation methods
By both methods, the value today (DCF $172 · Multiples $150) exceeds the market price ($133).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $133 trades ~11.3% below its value discounted to today (~$150); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($187) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$93.
Thesis
The business
A single-line discount chain following the sale of Family Dollar, with purchasing and distribution scale that sustains a return on capital of 24.1%, comfortably above the 10% bar. The moat is narrow and stable: real scale, but no barriers to entry according to the company itself.
The valuation
Valued on P/E over adjusted earnings (owner earnings), with the revenue path anchored to the current FY2026 guidance (revenue and adjusted EPS) and an exit multiple within the specialty retail band. The base case returns +7% annually over 5 years, with $187 of projected value per share.
The margin of safety
At market price, today It trades close to intrinsic value, far from the required margin of safety. The gap between what the hurdle requires and what the base case returns is the discipline that replaces risk in the discount rate.
What to watch
The key test is whether the company can sustain average ticket and margin without tariffs and consumer trade-down eroding the fixed-price proposition; traffic has already turned negative in the first quarter of FY2026, so growth depends almost entirely on ticket and the multi-price format.
Educational / informational. Does not constitute investment advice.