Have Investors Been Overlooking Dollar General?

Dollar General (NYSE: DG) has a business model that seems to confuse many investors.

The company has expanded rapidly by meeting a specific need in the communities it serves for nearby stores that sell basic necessities at low prices. Its locations are profitable, but that profitability has a ceiling due both to the nature and pricing of the merchandise, and the fact that these are primarily neighborhood stores.

A consumer may travel significantly further to shop at a Target (NYSE: TGT) or Wal-Mart (NYSE: WMT), because those chains sell big-ticket items, and lower-priced ones in vast varieties. Dollar General does not. Instead it offers a smaller selection of foods, household goods, and other supermarket basics at very low prices. It's not a dollar store in the sense of strict adherence to the "everything for a buck or less" concept, but its take on discounting has proven resilient at a time when other types of retail are losing ground to digital rivals.

Source: Fool.com