Edward Jones analysts upgraded shares of Dollar General (NYSE:DG) to Buy from Hold, adding it to the firm's Focus List in a note Wednesday.
The analysts told investors that the attractive fundamentals of the dollar store industry, the reduced impact from internet competition, the long-term potential for continued store growth, and the expected market share gains should drive growth for the company in the foreseeable future.
"Dollar General possesses attractive store economics by operating smaller stores that become cash-flow positive within the first year of operation (faster than the retail-industry average)," wrote analysts.
"Dollar General has several initiatives to drive profitability over the longer term: 1. Hire more truck drivers for the company's private fleet, which saves money over using third-party drivers; 2. Self-distribute frozen and fresh food, which cuts out the cost of the middleman; and 3. Drive sales of private-label products that have much higher profit margins than branded products," they added.
Edward Jones believes that DG shares are attractively valued and do not adequately reflect its growth outlook.