Dollar Tree, Inc.DLTRNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $238.05 per share(market-calibrated)

+98.6%

Upside to Fair Value

Current

$119.88

Pure Model

$255.24

Fair Value

$238.05

Bull Case

$336.36

Bear Case

$191.19

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $255.24.

What's Driving This Ratingfor DLTR

↓

CapEx normalizing toward maintenance

Historical CapEx is 7.49% of revenue (heavy investment phase). Model fades this to 3.00% by Year 10, freeing up ~$1.3B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 9.39% — below the sector mature average of 16.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $3.9B (13.83% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 10.48% revenue growth in Year 1, fading to 4.69% by Year 5 and 2.50% by Year 10. Revenue reaches $28.2B by Year 10 (vs $17.6B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 63.14% indicates efficient cash generation. FCF reaches $3.2B by Year 10 (11.28% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.74

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.85%

Cost of Debt

Pre-tax Cost of Debt1.72%

Tax Rate24.65%

After-tax Cost of Debt1.30%

Equity Weight (E/V)76.76%

Debt Weight (D/V)23.24%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (76.76% × 7.85%) + (23.24% × 1.30%)

= 6.33%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$19.4B	$21.9B	$23.9B	$25.9B	$28.2B
EBIT	$1.8B	$2.1B	$2.2B	$3.0B	$3.9B
Tax	$450M	$507M	$554M	$751M	$963M
NOPAT	$1.4B	$1.5B	$1.7B	$2.3B	$2.9B
+ Depreciation	$782M	$881M	$963M	$1.0B	$1.1B
- Capex	$1.5B	$1.4B	$1.3B	$1.2B	$847M
- Δ NWC	$130M	$87M	$76M	$67M	$49M
Free Cash Flow	$572M	$922M	$1.3B	$2.1B	$3.2B
Discount Factor	0.941	0.832	0.736	0.651	0.542
Present Value	$538M	$767M	$931M	$1.4B	$1.7B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.2B

Terminal Growth Rate2.50%

WACC6.33%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$85.3B

PV of Terminal Value$46.2B

Exit Multiple Method

Year 10 EBITDA$5.0B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$100.9B

PV of Terminal Value$54.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.2B

PV of Terminal Value$46.2B

Enterprise Value$57.4B

(-) Net Debt$6.6B

Equity Value$50.9B

Shares Outstanding216M

Price per Share$235.74

Exit Multiple Method

PV of Projected FCFs$11.2B

PV of Terminal Value$54.6B

Enterprise Value$65.8B

(-) Net Debt$6.6B

Equity Value$59.3B

Shares Outstanding216M

Price per Share$274.74

Pure Model Fair Value

$255.24

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
4.33%	$355.20	$393.59	$421.94	$402.89	$384.74
5.33%	$280.58	$298.78	$323.41	$358.64	$384.74
6.33%	$232.21	$242.39	$255.24	$271.95	$294.58
7.33%	$197.17	$203.46	$211.07	$220.43	$232.24
8.33%	$170.04	$174.20	$179.08	$184.87	$191.86

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$191.19

59.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.93

Base Case

$255.24

112.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.74

Bull Case

$336.36

180.6% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.63

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Defensive Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth10.48%

Year 3 Revenue Growth5.94%

Year 5 Revenue Growth4.69%

Year 7 Revenue Growth3.82%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin9.39%

Terminal EBIT Margin16.00%

Tax Rate24.65%

Historical Capex / Rev7.49%

Terminal Capex / Rev3.00%

NWC / Revenue7.05%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Defensive sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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