Dollar General Corp. (NYSE:DG)

The financial analysis reveals several notable trends and shifts in key performance metrics over the six-year period.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited an overall upward trend from 2019 through 2023, increasing from approximately 1.98 billion US dollars to a peak of about 3.66 billion US dollars in 2023. However, there is a significant decline observed in 2024, where NOPAT falls sharply to approximately 2.43 billion US dollars, indicating a decrease in operating profitability after taxes in the most recent period.

Cost of Capital

The cost of capital has remained relatively stable over the observed periods, fluctuating modestly between 6.85% and 7.44%. The highest cost occurred in 2022 at 7.44%, followed by a gradual decrease to 6.85% in 2024. The downward trend in the cost of capital towards the latest period may suggest improved financing conditions or reduced risk premiums.

Invested Capital

Invested capital shows a consistent growth trajectory from about 18.1 billion US dollars in 2019 to approximately 26.3 billion US dollars in 2024. This steady increase suggests ongoing investment in the company's operations and assets, reflecting expansion or capital expenditure activities throughout the years.

Economic Profit

Economic profit demonstrates a strong rising trend from 2019, doubling from roughly 690 million US dollars in 2019 to a peak near 1.90 billion US dollars in 2023. This reflects an improvement in value creation above the cost of capital. However, similar to NOPAT, a marked reduction occurs in 2024, dropping to around 630 million US dollars, which indicates a contraction in the economic profitability in the most recent year.

In summary, the data indicate sustained growth in invested capital, rising operational profitability and economic profit up until 2023, followed by a notable decline in both NOPAT and economic profit in 2024. The cost of capital remained fairly steady with a slight downward trend recently, which might help offset some impacts from reduced profitability. The recent decline in profitability measures warrants further investigation to understand underlying causes and implications for future financial performance.

The annual financial data indicates notable fluctuations in the profitability metrics over the presented periods.

Net Income

Net income showed a consistent increase from February 1, 2019, through January 29, 2021, rising from approximately 1.59 billion US dollars to 2.65 billion US dollars. This upward trend indicates improved profitability during these years. However, in the subsequent years, net income declined, falling to about 2.40 billion US dollars by February 3, 2023, and further decreasing to approximately 1.66 billion US dollars by February 2, 2024. This decline in net income suggests challenges impacting profitability in the most recent years analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT similarly displayed an upward trajectory from February 1, 2019, through February 3, 2023. It grew from approximately 1.98 billion US dollars in 2019 to a peak of about 3.66 billion US dollars in 2023. This represents significant improvement in operating efficiency and profitability over this time frame. However, in the latest period ending February 2, 2024, NOPAT declined notably to around 2.43 billion US dollars, indicating a reduction in operating profitability despite the previous gains.

Overall, both net income and NOPAT exhibited substantial growth from 2019 through early 2023, reflecting enhanced financial performance and operational effectiveness. Nevertheless, the data for the most recent year reveals a marked decrease in these key profitability indicators, implying emerging issues or external factors affecting the company’s financial returns. Close monitoring and further analysis may be required to understand the drivers behind this downturn and to assess the company's future profitability prospects.

The data reflects trends in the provision for income taxes and cash operating taxes over a six-year period, from February 2019 to February 2024. Both financial items are presented in thousands of US dollars.

Provision for Income Taxes

The provision for income taxes displayed an overall upward trend between 2019 and 2023, beginning at 425,944 thousand US dollars in 2019 and peaking at 700,625 thousand US dollars in 2023. Specifically, the amount increased steadily from 2019 through 2021, reaching a high of 749,330 thousand US dollars in 2021. After this peak, the provision declined to 663,917 thousand US dollars in 2022, then rose slightly in 2023 before substantially decreasing to 458,245 thousand US dollars in 2024. This pattern suggests variability in tax expense recognition possibly influenced by changes in taxable income or tax planning strategies.

Cash Operating Taxes

Cash operating taxes also followed an increasing trend in the initial years, starting at 457,118 thousand US dollars in 2019 and reaching 823,390 thousand US dollars in 2021. This was followed by a decline in 2022 to 660,916 thousand US dollars and continued decreases through 2023 and 2024, reaching 596,198 thousand and 553,172 thousand US dollars respectively. The decline after 2021 indicates a reduction in actual cash outflows related to income taxes, which may correspond to changes in timing differences or tax provisions to cash payments.

Comparative Insights

Notably, cash operating taxes consistently exceed the provision for income taxes through 2021 but then fall below the provision in 2023 and 2024. This shift indicates a divergence between the tax expense recorded under accrual accounting (provision) and the cash paid for taxes, potentially due to deferred tax assets/liabilities or timing differences in tax payments. The peak of cash operating taxes in 2021, which is significantly higher than both preceding and subsequent years, may reflect a one-time tax payment or adjustment.

Overall, both the provision for income taxes and cash operating taxes exhibit peaks around 2021, followed by notable declines, with cash operating taxes showing a sharper descent. The divergence observed in recent years suggests evolving tax payment patterns and provision estimates that warrant closer examination for their implications on the company's tax strategy and cash flow management.

Total Reported Debt & Leases

The total reported debt and leases exhibit a consistent upward trend over the six-year period. Beginning at approximately $11.1 billion in early 2019, the figure increased steadily each year, reaching around $18.1 billion by early 2024. This represents an overall increase of roughly 63% from 2019 to 2024, with notable acceleration in growth between 2021 and 2023.

Shareholders’ Equity

Shareholders’ equity demonstrated moderate fluctuations with a slight downward trend until 2023, followed by a recovery in 2024. Initially valued at about $6.4 billion in 2019, it increased marginally in 2020 before decreasing progressively to a low of approximately $5.5 billion in early 2023. A rebound occurred in the final year to nearly $6.7 billion, almost recovering the equity levels observed at the beginning of the period.

Invested Capital

Invested capital showed a steady increase throughout the entire period. Starting at approximately $18.1 billion in 2019, it rose gradually each year, reaching about $26.3 billion by early 2024. This constitutes an increase of approximately 45% over six years, indicating continued investment and growth in capital base. The increases are consistent and without significant volatility.

Overall Analysis

The company appears to have increased its leverage significantly, as evidenced by the growing total reported debt and leases, which outpaced the growth in shareholders’ equity. Despite a temporary decline in equity through 2023, the final year saw a recovery to prior levels. The consistent rise in invested capital alongside increasing debt suggests an expansion strategy possibly funded by borrowing. The leverage position warrants monitoring due to the growing debt level relative to equity.

Economic profit

The economic profit displayed an overall increasing trend from 2019 to 2023, rising significantly from approximately 690 million USD in 2019 to a peak of about 1.9 billion USD in 2023. However, in 2024, a considerable decline is observed, with economic profit falling sharply to approximately 630 million USD, indicating reduced profitability compared to the previous year.

Invested capital

Invested capital steadily increased throughout the entire period from 2019 to 2024. The value grew from around 18.1 billion USD in 2019 to 26.3 billion USD in 2024, reflecting continuous investment and expansion of the company's capital base over the six-year period.

Economic spread ratio

The economic spread ratio demonstrated variability across the years. It started at 3.81% in 2019, saw a moderate increase through 2020, and peaked at 7.65% in 2023. However, the ratio dropped substantially in 2024 to 2.39%, the lowest in the analyzed period. This suggests a decline in the company's ability to generate returns above its cost of capital in the most recent year.

Summary of trends

Over the analyzed period, the company showed strong growth in economic profit and invested capital, indicating expansion and profitability improvements up to 2023. The economic spread ratio's peak in 2023 highlights optimal efficiency in generating value over invested capital at that time. The sharp declines in economic profit and spread ratio in 2024 suggest challenges affecting profitability and return metrics despite ongoing increases in invested capital. These findings imply that the company faced a less favorable operating or capital cost environment in the latest year, resulting in diminished economic value creation.

Net Sales Trend

Net sales demonstrated a steady upward trajectory throughout the periods. From approximately $25.6 billion in early 2019, net sales rose consistently each year, reaching nearly $38.7 billion by early 2024. This indicates ongoing revenue growth, with the most substantial increases occurring between 2020 and 2021, and again from 2021 to 2023, although growth slowed slightly between 2023 and 2024.

Economic Profit Trend

Economic profit displayed a fluctuating pattern over the years. Initially, it increased moderately from around $690 million in early 2019 to approximately $1.57 billion in early 2021. It then slightly decreased in 2022 but surged again to $1.90 billion in 2023. However, a notable decline occurred in 2024, with economic profit falling sharply to around $630 million, the lowest point in the period analyzed.

Economic Profit Margin Analysis

The economic profit margin mirrored the behavior of economic profit with regard to relative changes. Starting at 2.69% in 2019 and maintaining that level into 2020, the margin increased significantly to 4.66% by 2021. A slight decline followed in 2022, but the margin increased to its peak of 5.01% in 2023. In 2024, there was a steep decline to 1.63%, despite net sales reaching their highest level, indicating a reduction in profitability relative to sales.

Overall Insights

The data reveals consistent revenue growth without corresponding stability in economic profitability. While economic profit and its margin improved substantially during the middle years (2020 to 2023), the sharp drop in 2024 suggests increased costs or decreased efficiency impacting profit generation relative to sales. The divergence between rising net sales and reducing economic profit margin in the most recent period warrants further investigation into expense management, pricing strategies, or market conditions to understand the causes of diminished profit performance.