To some extent, Dollar General’s business model resembles that of Dollarama: both are discount retailers and fall into the dollar-store category. However, Dollar General generates about 82% of its revenue from food (the rest comes from discretionary products such as clothing or home décor items); in contrast, Dollarama generates most of its revenue from discretionary products. I consider Dollar General to be a chain of small grocery stores mainly located in rural areas, whose customer base is generally less affluent.
Founded in 1939, Dollar General became a public company in 1968. The company was taken private in 2007 before returning to the stock market in 2009. Today, it is one of the largest retailers in the United States in terms of store count, with more than 21,000 locations across the country.
Since its IPO in 2009, the company’s revenue has increased from $11.8 billion to $40.6 billion, representing a compound annual growth rate of 8.6%. As for its earnings per share, they rose from $1.04 in 2009 to $5.92 in 2025 (the company’s fiscal year ends in January), representing a compound annual growth rate of 12.3%. This explains why the stock price increased from $21 at its IPO in 2009 to a recent price of nearly $125. Including dividends, the stock has delivered a compound annual return of 12.8% to shareholders since 2009.
Despite its excellent financial performance since 2009, the company has encountered difficulties since 2020. Like other retailers, Dollar General experienced particularly strong results during the pandemic years. Thus, in 2021 (its fiscal year ending in January), its revenue increased by 21.6% compared to 2020, while its earnings per share jumped 57.4%, reaching $10.61. The company managed to maintain these earnings for a few years, but by fiscal 2024, it became clear that the golden years were behind it. Many issues emerged, including logistical challenges, difficulties in retaining and recruiting employees, and a notable rise in shoplifting. In 2024, earnings per share fell to $7.55, then to $5.92 in 2025.
What is interesting in this story is how the stock price evolved during this period. I believe it clearly demonstrates that stock markets tend to react in extreme ways to a stock—rising sharply when everything is going well and falling sharply when a company’s performance deteriorates.
At the end of 2022, the stock price reached an all-time high of more than $255. It is true that the company’s earnings per share were then at a record level of $10.68 (fiscal year ending in January 2023), but at $255, the stock was trading at nearly 22 times its earnings per share.
As mentioned previously, earnings per share then declined to $5.92 in 2025. At its low point in early 2025, the stock was trading at about 12.0 times the company’s last-twelve-month earnings. The following chart shows the evolution of the stock’s forward price-to-earnings ratio over the past 10 years:
This example clearly illustrates that investors tend to overreact when valuing a company. When everything is going well, they tend to believe that favorable conditions will continue, thereby assigning high valuation levels. When the situation appears to be deteriorating, they lose confidence and assume improvement is unlikely, assigning a low valuation to the stock.
I believe this tendency among investors can be attributed to the cognitive bias of extrapolation—that is, the tendency to extrapolate recent results or trends.
This pattern is constantly observed in the markets. It is also what regularly creates attractive buying opportunities for investors who look beyond the next quarter. Indeed, in our portfolio management, we were able to take advantage of several opportunities like Dollar General’s in 2025.
Philippe Le Blanc, CFA, MBA
Chief Investment Officer at COTE 100
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