1 Growth Stock Down 57% to Buy Right Now

If Wall Street handed out military ranks, Dollar General (NYSE: DG) would likely be facing a rank demotion. Share prices of the discount retail giant have plunged 57% from their 52-week high amid continuing reports of underwhelming sales and weak earnings over the past year.

But while 2024 will go down in the history books as a lost battle, there are several reasons for Dollar General investors to believe the war is far from over. Following the deep sell-off and a reset of expectations, Dollar General stock now stands out as a bargain. The company's revamped growth strategy announced for 2025 could be the ammunition it needs to start a big turnaround.

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Despite its dismal stock price performance, investors watching from the sidelines would be making a mistake by assuming the company is facing some serious weakness or a rapidly deteriorating outlook. In this case, Dollar General's recent financial performance is more nuanced. Here's why shares of Dollar General could make a great addition to your portfolio.

Mixed results in 2024

Operating more than 20,523 retail locations primarily in the United States, Dollar General is recognized for its convenience store concept specializing in everyday household essentials sold at very discounted prices (but no longer all for $1 or less). In the most recently reported quarter (Q3, which ended Nov. 1), net sales climbed by 5% year over year, reflecting contributions from newly opened stores and a 1.3% increase in same-store sales. Unfortunately, expectations set at the start of the year had projected same-store sales growth as high as 2.7% for all of 2024.

Management attributes underperformance to the broader slowdown in the general economy. Dollar General's core customer base remains constrained by cumulative price increases and elevated borrowing costs in recent years. Between the soft top line and ongoing cost pressures, Dollar General's Q3 earnings per share (EPS) of $0.89 declined by 29% from last year.

That headline number doesn't inspire much confidence, but the key takeaway is that overall fundamentals are stable, including underlying profitability and positive free cash flow. The company has plenty of room to make the necessary strategic adjustments to continue moving forward.

Image source: Getty Images.

A revamped growth strategy for 2025

Dollar General has launched several initiatives to drive long-term, sustainable growth and strengthen shareholder value. One key step includes its "Back to Basics" program, which focuses on addressing supply chain and inventory efficiency while strategically reorganizing its merchandise mix toward more competitive pricing to maintain customer engagement.

For 2025, the company unveiled "Project Elevate," which targets the remodeling of approximately 2,250 stores, with expectations that enhanced customer experiences at these locations will drive incrementally higher same-store sales. The plan also includes opening approximately 575 new U.S. locations this year.

Collectively, these efforts position Dollar General to emerge stronger, particularly if the overall economy improves. Recent interest rate cuts by the Federal Reserve, coupled with indications of rising consumer confidence, could be the catalyst Dollar General needs to get back on track as an industry leader.

Wall Street analysts forecast the company will manage a 4.3% revenue increase in 2025, accompanied by a 1.5% rebound in EPS. The potential that the company exceeds these estimates would help confirm its turnaround strategy is working.

Data source: Yahoo Finance. YOY = year over year. Table by author.

Value at the stock's 52-week low

Perhaps the most compelling reason to buy shares of Dollar General is its attractive valuation, trading at just 13 times its 2025 consensus EPS estimate. This forward P/E level represents a significant discount to retail peers like Walmart, trading at 38, or Target, trading at 16. It also highlights Dollar General's upside potential in a scenario where growth momentum returns. Whether the share price rallies sooner or later, investors are being paid to wait with the help of its attractive 3.3% dividend yield, making the stock a solid income idea.

Data by YCharts.

So is Dollar General a buy?

I'm bullish on Dollar General and predict 2025 as the start of a multiyear comeback story. The stock isn't perfect, and the company still has a lot to prove, but it has all the pieces in place to surprise Wall Street. Investors confident in the company's long-term potential might want to consider adding shares to a diversified portfolio.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.