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Dollar General (DG): analysis traps

Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q2 FY27, to Jul 31, 2026, filed Aug 27, 2026; rules v1.1

Dollar General (DG): 0 rules of 10 triggered on the filings to Jul 31, 2026. 1 to review; 2 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.

Check these first

A precise DCF value = the true value To review · confidence high

The DCF's point value is 184.58 a share (price 138.00); 84% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 74.56 to 294.60; across every method the research ran the range is 47 to 614. The value is a range; the decimals are not information.

Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.

Every rule

A01 FCF growth = the business improved Not triggered confidence high

Free cash flow rose $707M to $2.4B; working capital and lower capex explain 40% of it, so most of the gain is in operating cash flow itself.

The figures and how they are read

Fiscal year before	FY25
Fiscal year	FY26
Operating cash flow, year before	$3.0B
Operating cash flow	$3.6B
Capex, year before	$1.3B
Capex	$1.2B
Free cash flow, year before	$1.7B
Free cash flow	$2.4B
Change in FCF	$707M
Change in capex	−$69M
Working capital: change in its cash contribution	$214M
Of which: capex cut	$69M
Of which: working capital released	$214M
Share of the increase that need not repeat	+40.0%
Operating cash flow before working capital: change	424313000.00

FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement

Source: FY26 (cash flow statement, fiscal year) · FY25 (cash flow statement, fiscal year before)

A07 Stock compensation added back = no economic cost Not triggered confidence high

Stock compensation is 0.2% of revenue: small enough that adding it back changes little.

The figures and how they are read

Fiscal year	FY26
Stock compensation	$91M
Revenue	$42.7B
SBC / revenue	+0.2%
Buybacks	0
Buybacks / SBC	0.0
Diluted shares, year before	220.0M shares
Diluted shares	220.8M shares
Diluted shares: change	+0.4%

SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section

Source: FY26 (stock compensation, buybacks and the diluted share count, fiscal year)

B02 Receivables growing = future cash is certain Insufficient data

fewer than five quarters with receivables and revenue on file (a year-over-year comparison needs five)

B08 Adjusted profit = economic profit Insufficient data

no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS

C02 Low net debt = no refinancing risk Not triggered confidence medium

$14M comes due within a year, 250.0× covered by cash and investments of $1.6B plus $2.0B of free cash flow.

The figures and how they are read

Cash and investments	$1.6B
Debt	$4.6B
Net debt	$3.0B
Due within a year	$14M
Read from	the debt maturity table
Free cash flow, twelve months	$2.0B
Cash plus free cash flow	$3.6B
Coverage of what is due	250.0
Due in the second year	$13M
Balance sheet date	2026-07-31

due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed

Source: FY26 (debt maturities, cash and investments)

D03 EPS growth = profit growth Not triggered confidence high

EPS rose 33% and net income rose 34% in Q2 FY27; the share count rose 0.3%: EPS growth follows profit growth.

The figures and how they are read

Quarter	Q2 FY27
Quarter before	Q2 FY26
EPS, year before	$1.86
EPS	$2.48
Net income, year before	$411M
Net income	$550M
Diluted shares, year before	220.9M shares
Diluted shares	221.5M shares
EPS growth	+33.3%
Net income growth	+33.8%
Diluted shares: change	+0.3%
eps from profit	$0.63
eps from share count	-$0.01

EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)

Source: Q2 FY27 (net income, diluted shares, EPS) · Q2 FY26 (the same quarter a year earlier)

E02 Low P/E at a cyclical peak = undervalued Not triggered confidence medium

Net income of $1.7B is not at a cyclical high against the last eight years (median $1.7B, best $2.7B): the P/E of 17.9× is on a normal year.

The figures and how they are read

market value	$30.6B
net income ttm	$1.7B
pe ttm	17.90
net income median fy	$1.7B
pe mid cycle	17.80
net income peak fy	$2.7B
years	FY19 / 1589.0; FY20 / 1713.0; FY21 / 2655.0; FY22 / 2399.0; FY23 / 2416.0; FY24 / 1661.0; FY25 / 1125.0; FY26 / 1512.0
down years in window	3

P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median

Source: Q2 FY27 (net income, trailing twelve months)

E07 A precise DCF value = the true value To review confidence high

The figures and how they are read

dcf value	184.58
price	138.00
terminal value share	+83.6%
swing by input	Operating margin / ±3 pts / 74.56 / 294.6; WACC / ±1 pt / 143.59 / 254.26; Revenue growth (each year) / ±5 pts / 147.89 / 228.75; Terminal growth / ±0.5 pt / 170.63 / 202.62
range all methods	46.99; 614.38

the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran

Source: 2026-11-08 (valuation research)

What would explain it innocently

A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
The inputs that matter most are themselves well known (a regulated return, a long contract)

What to look for in the filing

Which input you believe differs from the research's and why
What the price implies for growth (the reverse DCF on the fair-value page)

What would show the trap does not apply

The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
The company's cash flows over the next three years track the DCF's early years

Look again: next filing.

J06 A bank's low P/E and high profit = safe Not applicable

not a bank

J08 A REIT's low net income = the dividend is unsafe Not applicable

not a REIT

What the statuses mean

Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.

Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.

Record a view

A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).

Every rule and the companies it triggers on → Dollar General: cash flow → Earnings quality score →

Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.