Option Trade 
Dollar General Corp. (NYSE:DG) Calls 
Wednesday, 25th May, 2016

** OPTION TRADE: Buy the DG Aug 2016 85.000 call at approximately $3.00. Place a pre-determined sell at $6.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.20.

by Ian Harvey

May 25, 2016

Dollar General Corp. (NYSE: DG), a discount retailer in the United States, is slated to report first-quarter fiscal 2016 results before the market opens tomorrow, Thursday May 26, with the last earnings report coming in stronger than expected.

The CEO commented:

“2015 was another great year for Dollar General as we achieved strong financial results with a focus on profitable sales growth. For the 26th consecutive year, we delivered positive same-store sales growth. In the fourth quarter, we effectively balanced sales and operating profit through our toughest quarterly comparison of the year to deliver record results leading to full year diluted EPS growth of 13%.”

“Looking ahead, Dollar General continues to have significant opportunities for growth. The goal of our long-term growth model that we announced today is to drive 11% to 17% total annual shareholder return per year through EPS growth and dividend yield. Considering the financial results we have delivered over the last three years and consistent with how we are managing the business, our growth model is focused on increasing long-term shareholder value by driving profitable sales growth, capturing growth opportunities, enhancing our position as a low-cost operator and investing in our people. For 2016, we plan to return approximately $1.3 billion to shareholders through anticipated quarterly cash dividends and consistent share repurchases.”

“The Company remains well-positioned to serve our customers with value and convenience. We continue to take the appropriate strategic steps to ensure that we are investing in the Company for sustainable and consistent growth.”

It is believed that Dollar General's commitment to better price management, merchandise, cost containment and operational initiatives will favor results in the quarter to be reported.

Dollar General Corp. has a market cap of $23.27 billion and a P/E ratio of 20.56. The stock’s 50 day moving average is $82.82 and its 200 day moving average is $75.49. Dollar General Corp. has a 12-month low of $59.75 and a 12-month high of $87.42.

Dollar General Corp. (NYSE:DG)‘s stock had its “buy” rating reissued by analysts at Deutsche Bank in a note issued to investors on Monday. They currently have a $91.00 price target on the stock, down from their previous price target of $95.00. Deutsche Bank’s price objective suggests a potential upside of 12.04% from the company’s previous close.

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

• Zacks Investment Research upgraded shares of Dollar General Corp. from a “hold” rating to a “buy” rating and set a $92.00 target price on the stock in a report on Monday, May 2nd.

• Bank of America upgraded shares of Dollar General Corp. from a “neutral” rating to a “buy” rating and boosted their target price for the stock from $98.00 to $100.00 in a report on Wednesday, May 4th. They noted that the move was a valuation call.

• Jefferies Group restated a “buy” rating and set a $97.00 target price on shares of Dollar General Corp. in a report on Monday, May 16th.

• Finally, Telsey Advisory Group restated an “outperform” rating and set a $89.00 target price (up from $83.00) on shares of Dollar General Corp. in a report on Friday, March 11th.

Four research analysts have rated the stock with a hold rating, eighteen have issued a buy rating and one has assigned a strong buy rating to the company’s stock. The stock has a consensus rating of “Buy” and a consensus price target of $91.14.

Harvey’s Options Volatility Indicator

Conclusion

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

**OPTION TRADE: Buy the DG Aug 2016 85.000 call at approximately $3.00. Place a pre-determined sell at $6.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.20.

”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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