Option Trade 
Dollar General Corp. (NYSE:DG) Calls 
Wednesday, March 09, 2016

**OPTION TRADE: Buy the DG May 2016 75.000 call (DG160520C00075000) at approximately $2.80. Place a pre-determined sell at $5.60.

Note: No protective stop losses added -- but if you wish to do so make it $1.10.

by Ian Harvey

March 09, 2016

Dollar General Corp. (NYSE: DG), a discount retailer in the United States, is scheduled to report its fourth-quarter results before the market open on March 10. Analysts forecast quarterly earnings of $1.27 per share, up from $1.17 during the same period last year.

Dollar General has been trending higher over the last four months, and an upbeat earnings report should help the stock build on recent momentum. Last quarter the company posted better than expected earnings, but revenue was slightly weaker than expected. The company has been working hard to control costs, which has helped earnings, and should continue to boost earnings during the recent quarter.

The stock has been trending higher since the latter part of 2015, and shares are currently up 4.0% on the year.

Dollar General Corp. has a 12-month low of $59.75 and a 12-month high of $81.42. The company’s 50 day moving average price is $73.15 and its 200 day moving average price is $70.28. The firm has a market capitalization of $21.81 billion and a P/E ratio of 19.59.

Hedge funds and other institutional investors have recently added to their stakes in the company. Two of these are:-

CIBC World Markets increased its position in shares of Dollar General Corp. by 334.4% during the fourth quarter. The institutional investor owned 15,533 shares of the company’s stock after buying an additional 11,957 shares during the period. CIBC World Markets’ holdings in Dollar General Corp. were worth $1,116,000 as of its most recent filing with the SEC.

Also, Nippon Life Insurance Co. boosted its stake in Dollar General Corp. by 3.3% during the fourth quarter. The firm owned 24,175 shares of the company’s stock after buying an additional 776 shares during the period. Nippon Life Insurance Co.’s holdings in Dollar General Corp. were worth $1,737,000 as of its most recent filing with the SEC.

Dollar General Corp.‘s stock had its “overweight” rating reaffirmed by equities research analysts at Piper Jaffray in a report released on Tuesday. They presently have a $78.00 target price on the stock. Piper Jaffray’s price objective points to a potential upside of 4.59% from the company’s previous close.

As well, Dollar General Corp. has received a “BBB-” credit rating from analysts at Morningstar. The investment research firm’s “BBB-” rating suggests that the company is a moderate default risk. They also gave their stock a three star rating.

Also, several equities research analysts have recently commented on the company.

• Raymond James cut their target price on shares of Dollar General Corp. from $90.00 to $85.00 and set a “strong-buy” rating for the company in a research report on Friday, December 4th.

• RBC Capital reiterated a “buy” rating on shares of Dollar General Corp. in a research report on Thursday, December 3rd.

• Jefferies Group reissued a “buy” rating and issued an $81.00 price target on shares of Dollar General Corp. in a report on Thursday, February 11th.

• Finally, Deutsche Bank reissued a “buy” rating and issued a $79.00 price target (down from $80.00) on shares of Dollar General Corp. in a report on Thursday, February 11th.

Dollar General Corp. has been assigned a consensus recommendation of “Buy” from the twenty-two analysts that are presently covering the firm. One research analyst has rated the stock with a sell rating, four have given a hold rating, sixteen have issued a buy rating and one has issued a strong buy rating on the company. The average price target among analysts that have updated their coverage on the stock in the last year is $84.06.

Harvey’s Options Volatility Indicator

Conclusion

DG has a P/E of 19, so there is room for a move to the upside on an earnings beat, and the downside will be somewhat limited. If the company's quarterly results can fall close to the estimate, and the overall market remains upbeat the stock should move higher.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the DG May 2016 75.000 call (DG160520C00075000) at approximately $2.80. Place a pre-determined sell at $5.60.

Note: No protective stop losses added -- but if you wish to do so make it $1.10.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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