3 Discount Retail Stocks to Buy Amid Industry Growth

Target TGT, Walmart WMT, Nordstrom JWN, and countless others retailers have been forced to revamp their business models on the fly to help fend off a wave of online sellers over the past few years. However, at least one retail industry—discount retail—actually seems to be better off these days.

There are an array of reasons that off-priced sellers are bucking sector-wide trends, most of which relate directly to the socioeconomic background of their customers and physical retail locations.

The discount retail uptick occurred even before the new Republican tax law was passed, but now analysts seem more confident in the sector based on these GOP-related headwinds. J.P. Morgan JMP analysts recently reiterated their “Overweight” rating for Dollar Tree, noting that low-to-middle income households are set to earn substantial monetary benefits this year.

Along with more money in the pockets of their consumer base, the retailers themselves are set to see lower effective tax rates going forward.

With all of this said, let’s take a look at three discount retail stocks that growth-minded investors might want to consider.

1.       Dollar Tree, Inc DLTR

Dollar Tree is one of the last true remaining dollar stores and iscurrently a Zacks Rank #2 (Buy). On top of reiterating the stock’s rating, J.P. Morgan analysts also upped its price target from $120 per share to $133 per share, which represents a 26% upside from Wednesday's closing price.

Dollar Tree is expected to see its earnings surge by 36% in the fourth quarter and 27.56% for the year, based on our current Zacks Consensus Estimates. The company also sports an Earnings ESP of 1.95%, which means earnings estimates have been higher directly ahead ofits Q4 report—set for early March.

The company has also witnessed nine earnings estimate revisions with 100% agreement to the upside for the coming fiscal year. Looking even further ahead, Dollar Tree is projectedto grow its earnings per share figures at an annualized rate of 14.55% over the next three to five years.

2.       Burlington Stores, Inc. BURL

Burlington is currently a Zacks Rank #2 (Buy) and rocks an “A” grade for Growth in our Style Scores system. This off-priced clothing retailer expects to open a total of 37 new stores in fiscal 2017. Burlington is also projected to see its Q4 and full-year revenues climb 16.85% and 32.10%, respectively, when it reports its results on March 1.

Furthermore, the retailerhas earned six earnings estimate revisions for fiscal 2018 with 100% agreement to the upside. Investors should also be happy to note that Burlington has met or topped earnings estimates for four straight years, with an average surprise of 15% in the trailing four quarters. Burlington is expected to see its bottom line surge at an annualized rate of 18.65% over the next three to five years.

3.       Dollar General Corporation DG

The discount retailer is currently a Zacks Rank #2 (Buy) and sports an overall “A” VGM score. In the third quarter, Dollar General announced its plan to open 900 new stores and remodel 1,00 locations in 2018. DG has received four upward earnings estimate revisions within the last 60 days for its upcoming Q4 results. On top of that, Dollar General’s Earnings ESP of 2.20% means that estimates are coming in higher directly ahead of its fourth-quarter report. 

Looking ahead to the upcoming fiscal year, the company has earned eight earnings estimate revisions with 100% agreement to the upside. Dollar General is also expected to expand its EPS figure by nearly 21% next year. On top of all of this, DG is projected to expand its EPS figures at an annualized rate of 11.55% over the next three to five years.

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JMP Group LLC (JMP) : Free Stock Analysis Report
 
Nordstrom, Inc. (JWN) : Free Stock Analysis Report
 
Wal-Mart Stores, Inc. (WMT) : Free Stock Analysis Report
 
Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
 
Dollar General Corporation (DG) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
 
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