Dollar General Corp. (NYSE:DG)

The financial data reveals several noteworthy trends spanning from February 2019 through February 2024. The evaluation focuses on net operating profit after taxes (NOPAT), cost of capital, invested capital, and economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited a general upward trend from 2019 through 2023, increasing from approximately $1.98 billion in 2019 to a peak of around $3.66 billion in 2023. However, in the latest period ending February 2024, NOPAT experienced a significant decline to roughly $2.43 billion, representing a substantial decrease relative to the prior year.

Cost of Capital

The cost of capital fluctuated mildly across the years, initially rising from 7.14% in 2019 to a peak of 7.45% in 2022. It subsequently declined to 7.15% in 2023 and further to 6.85% in 2024. This downward movement in recent years suggests potentially favorable financing conditions or shifts in the company’s risk profile.

Invested Capital

Invested capital steadily increased across the entire period, starting at approximately $18.1 billion in 2019 and reaching about $26.3 billion in 2024. This consistent growth indicates ongoing investments or asset accumulation, reflecting corporate expansion or capital-intensive initiatives.

Economic Profit

Economic profit rose significantly from 2019 to 2023, moving from about $689 million to a peak near $1.89 billion. This aligns with the NOPAT growth and suggests enhanced value creation during this timeframe. However, in 2024, economic profit sharply declined to approximately $629 million, mirroring the reduction in NOPAT and indicating diminished profitability relative to the cost of capital.

In summary, the company demonstrated strong profit and value growth trends through 2023, supported by increasing operating profits and economic profits alongside rising invested capital. The recent year, however, marked a notable reversal with decreased profitability measures despite a continued rise in invested capital and a lower cost of capital. This may suggest emerging operational challenges or shifts in market conditions affecting 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 showed a generally upward trend from 2019 to 2023, increasing from 688,774 thousand US dollars to a peak of 1,893,850 thousand US dollars in 2023. This represents a substantial improvement in value creation over these years. However, in 2024, economic profit experienced a sharp decline, falling to 628,761 thousand US dollars, which is notably lower than the levels observed from 2020 through 2023.

Invested Capital

Invested capital consistently increased each year, rising from 18,107,408 thousand US dollars in 2019 to 26,309,034 thousand US dollars in 2024. This steady growth indicates ongoing investment and expansion activities, with the capital base growing by nearly 45% over the six-year period.

Economic Spread Ratio

The economic spread ratio maintained a relatively stable moderate level around 3.8% to 3.9% in 2019 and 2020 before experiencing a significant increase in subsequent years, reaching its peak at 7.65% in 2023. This suggests that the return generated on invested capital improved substantially during this period. In 2024, however, the economic spread ratio dropped sharply to 2.39%, indicating a marked reduction in the spread between return on invested capital and the cost of capital.

Overall Insights

The company demonstrated strong growth in invested capital and improved profitability and returns from 2019 through 2023, as evidenced by rising economic profit and increasing economic spread ratio. The peak in 2023 reflects the highest efficiency in generating economic value relative to invested capital. However, the data for 2024 reveals a concerning downturn in both economic profit and economic spread ratio despite continued growth in invested capital. This divergence suggests challenges in maintaining profitability margins or increased costs that impacted value generation during the most recent period.

The financial data reveals several noteworthy trends. Net sales have demonstrated a consistent upward trajectory from February 2019 through February 2024, increasing from approximately $25.6 billion to nearly $38.7 billion. This steady growth indicates a positive development in the company’s revenue generation over the six-year period.

Economic profit also shows a generally increasing pattern from 2019 through 2023, rising from approximately $689 million to a peak of about $1.89 billion. However, a significant decline occurs in 2024, with economic profit falling to roughly $629 million, indicating a sharp reduction compared to the previous year.

Examining the economic profit margin, a percentage measure indicating economic profit relative to net sales, the margin starts at 2.69% in both 2019 and 2020. It then improves notably, reaching its highest point at 5.0% in 2023, which suggests enhanced profitability relative to sales during this period. Nonetheless, the margin experiences a steep drop to 1.63% in 2024, marking the lowest point in the observed range.

Revenue Trend

There is a consistent increase in net sales year over year, reflecting strong sales growth and possibly successful expansion or market penetration strategies.

Economic Profit Trend

Economic profit grew steadily until 2023, indicating improving efficiency or profitability. The sudden decline in 2024 may suggest rising costs, decreased margins, or other operational challenges.

Profitability Margin

The economic profit margin’s peak in 2023 at 5.0% signifies strong profitability relative to sales. The subsequent sharp fall to 1.63% in 2024 signals a significant erosion in profitability efficiency.

In summary, while the company has enjoyed steady sales growth and increasing economic profitability from 2019 to 2023, the data of 2024 reflects a notable retreat in economic profit and margin despite high sales levels. This contrast indicates potential underlying issues affecting profitability that warrant further investigation.