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Market Participants Recognise Dollar Tree, Inc.'s (NASDAQ:DLTR) Earnings Pushing Shares 25% Higher

Simply Wall St · 23h ago

Dollar Tree, Inc. (NASDAQ:DLTR) shares have continued their recent momentum with a 25% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 87% in the last year.

Following the firm bounce in price, Dollar Tree may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 23.4x, since almost half of all companies in the United States have P/E ratios under 19x and even P/E's lower than 11x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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Dollar Tree could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Dollar Tree

pe-multiple-vs-industry
NasdaqGS:DLTR Price to Earnings Ratio vs Industry December 16th 2025
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dollar Tree.

Is There Enough Growth For Dollar Tree?

Dollar Tree's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 4.0%. The last three years don't look nice either as the company has shrunk EPS by 22% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 15% per year during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 11% per annum growth forecast for the broader market.

With this information, we can see why Dollar Tree is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Dollar Tree's P/E?

Dollar Tree's P/E is getting right up there since its shares have risen strongly. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Dollar Tree's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for Dollar Tree you should be aware of.

If you're unsure about the strength of Dollar Tree's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.