Dollar General Corp. (NYSE:DG)

The financial analysis reveals several notable trends in the company's performance over the six-year period.

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibited a generally positive growth trend from 2019 through 2023, increasing from approximately $1.98 billion in 2019 to a peak of about $3.66 billion in 2023. However, there was a significant decline in 2024, with NOPAT dropping to approximately $2.43 billion. This suggests a recent downturn in profitability after several years of growth.

Cost of Capital

The cost of capital showed minor fluctuations over the examined period, starting at 7.16% in 2019, peaking slightly around 7.47% in 2022, and then declining to the lowest value of 6.87% in 2024. The downward trend in the cost of capital towards the end of the period could reflect improved financing conditions or a lower perceived risk of the company.

Invested Capital

Invested capital steadily increased each year, starting from approximately $18.11 billion in 2019 and rising to about $26.31 billion in 2024. This consistent growth indicates ongoing investment in assets or capital projects, reflecting expansion or reinvestment strategies.

Economic Profit

Economic profit showed substantial growth from 2019 to 2023, increasing from roughly $685 million to approximately $1.89 billion. This indicates that the company's profitability, above the cost of capital, improved substantially during this timeframe. However, in 2024, economic profit sharply declined to around $624 million, signaling a reduction in value creation compared to prior years.

In summary, while the company demonstrated steady growth in invested capital, acquisition of economic profit, and operating profit through 2023, there was a notable decline in both NOPAT and economic profit in 2024. This shift suggests emerging challenges impacting profitability and value generation despite a marginally lower cost of capital. The sustained increase in invested capital indicates that the company maintained its capital expenditures even as profitability metrics weakened recently.

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 demonstrated a noticeable upward trend from 2019 to 2023, increasing from 684,881 thousand US dollars in 2019 to a peak of 1,888,625 thousand US dollars in 2023. However, there was a significant decline in 2024, with economic profit decreasing sharply to 623,757 thousand US dollars. This suggests that while economic profit grew consistently over several years, a potential challenge or change in market conditions affected profitability in the most recent period.

Invested Capital

The invested capital showed a steady increase throughout the entire period under review, rising from 18,107,408 thousand US dollars in 2019 to 26,309,034 thousand US dollars in 2024. This consistent growth indicates continued investment and expansion activities by the company, possibly fueling operational capacities or strategic initiatives.

Economic Spread Ratio

The economic spread ratio initially increased from 3.78% in 2019 to a peak of 7.63% in 2023, indicating improving returns relative to the cost of capital over the years. However, similar to economic profit, the ratio saw a considerable decline to 2.37% in 2024. This drop implies a decrease in value creation efficiency in the most recent year, which could be due to increased costs, lower returns, or a combination of factors impacting profitability relative to invested capital.

Overall Trends and Insights

Over the six-year period, the company consistently increased its invested capital and generally improved its economic profitability up until 2023. The significant dip in both economic profit and economic spread ratio in 2024 suggests emerging challenges that negatively impacted financial performance despite the higher capital investment. The data highlights a shift from a period of growth and efficiency to one of decreased financial returns, which warrants close attention to underlying causes.

Net Sales

Net sales demonstrated a consistent upward trend over the six-year period, increasing from approximately $25.6 billion in 2019 to about $38.7 billion in 2024. The growth was steady each year, with notable acceleration between 2020 and 2021, and a more moderate increase in the final year.

Economic Profit

Economic profit showed significant volatility during the same period. Starting at around $685 million in 2019, it increased to approximately $742 million in 2020, followed by a substantial jump to nearly $1.57 billion in 2021. In 2022, economic profit slightly declined to about $1.51 billion but rose again to its peak of roughly $1.89 billion in 2023. However, a stark decrease occurred in 2024, with economic profit falling to approximately $624 million, the lowest level seen since 2019.

Economic Profit Margin

The economic profit margin held steady at 2.67% in both 2019 and 2020, then improved significantly to 4.64% in 2021. A slight decline to 4.4% occurred in 2022, followed by a peak margin of 4.99% in 2023. In 2024, the margin sharply contracted to 1.61%, representing the most pronounced decrease across the observed years.

Overall Insights

The data reveals a strong correlation between growth in net sales and economic profit, particularly from 2019 to 2023, signaling effective conversion of sales into economic profit during most of this period. The declining economic profit and margin in 2024, despite continued growth in net sales, suggests increased costs, reduced operational efficiency, or other challenges impacting profitability.