Last update on 2024-06-07

Dollar Tree (DLTR) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Dollar Tree's Piotroski F-Score is 8 out of 9, indicating a strong financial position for 2023. This analysis highlights the company's profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 8

We're running Dollar Tree (DLTR) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

We analyzed Dollar Tree (DLTR) using the Piotroski F-Score, which assesses the strength of a company's financial position through 9 criteria. DLTR scored an 8 out of 9, indicating strong profitability, liquidity, and operating efficiency. Highlights include positive net income of $1.615 billion, consistent positive cash flows, growing return on assets from 0.0626 to 0.0722, improved current ratio, reduced outstanding shares, increasing gross margin and asset turnover. Though DLTR missed the point for higher operating cash flow than net income and increasing leverage, its overall performance portrays a robust financial health.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Dollar Tree (DLTR) seems like a worthwhile investment to consider. Scoring 8 out of 9 on the Piotroski F-Score suggests the company has strong financial health and operational efficiency. Potential investors might appreciate DLTR's consistent profitability, effective asset use, and strategic share buybacks. However, keep an eye on the leverage trend and ensure it aligns with your risk tolerance. Overall, it appears to be a solid choice but always complement this with your broader investment strategy and further research.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Dollar Tree (DLTR)

Company has a positive net income?

The criterion checks for positive net income. Net income signifies a firm's profitability, where positive income often draws favorable investor sentiment.

Dollar Tree (DLTR) reported a net income of $1,615,400,000 in 2023. This is a positive outcome, indicative of profitable operations. Reviewing a 20-year net income history showcases impressive growth, with significant peaks such as $1.7 billion in 2018 and notable recovery from a substantial loss in 2019. Consequentially, Dollar Tree earns 1 point.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) represents the amount of cash generated by a company's normal business operations.

For Dollar Tree (DLTR), the CFO for 2023 stands at $1,614,800,000, which is positive. This is automatically a good sign, attributing 1 point to the company in the Piotroski Score. Historical data indicates that DLTR has consistently maintained positive CFO over the past 20 years, with a peak of $2,716,300,000 in 2021. This consistency implies robust operational efficiency and effective cash management. The notable stability in CFO underscores the company's resilience, even amid fluctuating economic conditions.

Return on Assets (ROA) are growing?

The first criterion evaluates the Return on Assets (ROA), comparing figures from 2022 to 2023 to assess improvement. This metric is vital for understanding the efficiency with which a company is utilizing its assets to generate profit.

The Return on Assets (ROA) for Dollar Tree (DLTR) increased from 0.0626 in 2022 to 0.0722 in 2023. By Piotroski's measure, this rise indicates an improvement in profitability and efficient asset use, hence earning 1 point. Despite this upward trend, industry comparisons reveal potential areas for growth. Dollar Tree's ROA remains below the 2023 industry median of 0.3123, suggesting room for further asset efficiency improvements to match or exceed industry standards. Historical company data and operating cash flow trends also underline Dollar Tree's consistent focus on leveraging its assets effectively.

Operating Cashflow are higher than Netincome?

Compare the Operating Cash Flow with the Net Income. If Operating Cash Flow is higher, add 1 point. This criterion is important as it indicates high-quality earnings rather than accruals.

For Dollar Tree in 2023, Operating Cash Flow was $1.61 billion, slightly lower than Net Income which was $1.615 billion. Therefore, the criterion would not be fulfilled, and 0 points would be added. Over the long term, analyzing past data shows healthy Operating Cash Flows relative to Net Income, indicating generally good earnings quality except for some outlier years.

Liquidity of Dollar Tree (DLTR)

Leverage is declining?

Change in Leverage compares the ratio of total liabilities to total assets for a period. A decrease in leverage indicates reduced financial risk and reflects positively on a firm's solvency.

For Dollar Tree (DLTR), the leverage increased from 0.3942 in 2022 to 0.3769 in 2023. Therefore, it does not add a point for this criterion. The increasing trend in leverage, even if minor, is seen as negative, potentially pointing to higher financial risk. Historical data shows a rise in leverage from low levels in the early 2000s to more elevated levels in recent years, with significant increases noted post-2014 after its acquisition of Family Dollar in 2015.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets. It is important because it provides insights into the company's short-term financial health and operational efficiency.

For Dollar Tree (DLTR), the Current Ratio increased from 1.343 in 2022 to 1.5069 in 2023. This indicates an improvement in the company's ability to cover its short-term liabilities with its current assets, which is a positive trend. Specifically, the ratio increased by roughly 12.2% year-over-year. Over the past 20 years, Dollar Tree's Current Ratio has fluctuated, with some peaks (e.g., 3.4678 in 2003) and troughs (e.g., 1.2038 in 2020). When compared to the industry median current ratio, which stood at 1.1753 in 2022 and 1.2876 in 2023, Dollar Tree's current ratio remains above the industry average, enhancing its attractiveness as an investment. Thus, for this criterion, Dollar Tree earns 1 point.

Number of shares not diluted?

The criterion of change in shares outstanding examines whether the company is reducing its number of outstanding shares. A decrease in shares outstanding is seen as positive because it often indicates share buybacks, which can signal the company's confidence in its future performance and usually enhances shareholder value.

In 2022, Dollar Tree (DLTR) had 227,900,000 outstanding shares, which decreased to 223,200,000 in 2023. This represents a reduction in outstanding shares. Decreasing the number of shares typically demonstrates a company's commitment to returning value to shareholders through share buybacks. Here, DLTR warrants a point for reducing its outstanding shares, which is generally seen as a positive indicator of the company's health and confidence in its financial stability.

Operating of Dollar Tree (DLTR)

Cross Margin is growing?

Gross margin measures the percentage of revenue that exceeds the cost of goods sold. It is vital because it indicates the core profitability of the company's operations.

The gross margin for Dollar Tree (DLTR) has increased from 0.294 in 2022 to 0.3154 in 2023, which is a positive sign. This increase suggests that Dollar Tree has improved its efficiency in managing the costs related to its goods. When compared to the industry median gross margin of 0.3123 for 2023, Dollar Tree's performance is slightly better. A higher gross margin is beneficial as it indicates healthier profit margins, enhancing the company's ability to cover other operational expenses and potentially investing in growth opportunities. Over the past 20 years, Dollar Tree's gross margin has experienced fluctuations but shows an improving trend as it surpassed both its previous year figure and the industry median in 2023. Consequently, Dollar Tree earns 1 point for this criterion.

Asset Turnover Ratio is growing?

Asset turnover is a measure of a company's efficiency in using its assets to generate sales. A higher asset turnover indicates better performance.

Comparing the asset turnover of Dollar Tree (DLTR) from 1.241 in 2022 to 1.2664 in 2023, we observe an increase, assigning a point to this criterion. This uptick, though modest, suggests a potential enhancement in Dollar Tree's operational efficiency. Over the last twenty years, the company's asset turnover has experienced significant fluctuations, peaking at 2.9109 in 2013. The recent upward trend may imply a strategic or operational improvement, albeit not yet reaching the past highs. Continuous monitoring is crucial to establish if this increase signifies a sustained recovery.