Dollar General stock is down 30% today just one day over the past 5 years it's down 38% so it's been it it's been struggling for a while but today it reported earnings and the numbers just weren't good missed expectations a guidance cut and right now it's trading at it's at a 52e low so $86 so new low for for the year but you know at a PE ratio of 12.6 it's it's looking like potentially could be a cheap Buy right so if you're looking to invest for the long term is this worth buying it does it look cheap you know or is this is this a classic value trap here so let's take a look at its latest numbers so it reported earnings today net sales up 4.2% for the period to 10.2 billion same store sales increase .5% so same store sales is arguably a much more important number for investors because unlike net sales which can get boosted by new store openings same store sales are just comparing the the revenue at stores which were open and operating a year ago versus how they're doing now so that that that gives you a better indication of whether the business is actually um doing better like if the existing stores are generating more sales the fact that same store sales was just .5% but net sales were 4.2% that tells you that really the Boost came from new store openings the more problematic issue was we see operating profit was down 20 almost 21% down to 550 million EPS down and so you know it's one thing to be able to grow but if you're growing and you're doing so while you're incurring greater losses then that's not necessarily you know a a good move forward so let's look further down here and what we see here is is that the company now also adjusted its forecast for the year so it's expecting a bit of a Slowdown so net sales growth 4.7% to four to to 5.3% versus a previous guidance of 6 to 6.7 same store sales also lower uh 1% to 1.6 versus 2 to 2.7 EPS also lower 5.5 to 620 versus 680 to 755 so a lot of lot of reductions across the board but one thing that always stands out to me for for Dollar General is that the company continuously invests in in growth even at a time would maybe makes sense to cut back on some of that expansion and focus on cutting costs like we can see that this year it's exp it's expecting its capital expenditures related to strategic initiatives to be around 1.3 to 1.4 billion that includes 730 new store openings 1620 remodels 80 5 relocations so that tells you that the business is still continuing to invest heavily into growth and it was recently that it opened its 20,000 store to give you some context into that Walmart has about less than 11,000 stores Dollar Tree has fewer than 177,000 stores so Dollar General has a whole lot of stores across the US and you know kind of can't help but wonder if it's it's a bit too saturated and it's cannibalizing its sales by opening too many locations especially at a time when you know its earnings numbers aren't looking all that great so based on this you know you might be a little bit concerned that the company's business one is slowing down it's still investing heavily into Capital uh Capital intensive projects like remodeling store relocations store openings so there's a lot of challenges ahead for Dollar General which is why the Stock's at a 52 we low but let's take a closer look at its actual financials to see if it's it's still a safe buy so if we look at its current assets uh the main one to focus on is really the cash and cash equivalent so 1.2 billion so it's up a lot more than than a year ago so that's that's a good thing because cash on hand is really key to keeping making sure it's got the it can sustain its operations obviously having inventory is nice but that's that's product that's moving and you know if it's not selling you might have to mark that down you know prepaid expenses current assets it's total current assets about 8.7 billion versus 8.4 billion um a year ago if we look at its current liabilities this is stuff that's got to pay within the next 12 months 7.1 billion right so not not a whole lot of flexibility there or leeway because you can see current assets 8.7 C liability 7.1 so not not not horribly um a problematic but obviously they got a lot of liabilities and a lot of long-term debt as well and this comes with being a capital intensive business where you have to raise money to be able to grow and launch all those new stores so a lot of a lot of issues there to consider especially in in the long run now the good th the good news is that if interest rates start coming down then that debt debt becomes less costly so Dollar General could potentially be a bit of a better play as interest rates come down because it because all that growth that it's that it's pursu could be a could be a bit cheaper and now if you look further down so this is where you know their their sales increased you know from from 9.8 to to 10.2 billion but cost of goods also increased um sgna increase and you'd expect that just because you're going to have to hire more staff you're going to have to hire more overhead as you have um More Store openings but the problem is that you know net income 3.66% of sales versus a year ago 4.79% so you know what's the point of all that growth if your profits are getting squeezed along the way so not terribly exciting in that sense um the one thing that I do find encouraging is that you know at least the company is generating a fair bit of cash so cash from its operating activities almost 1.7 billion versus 726 million um a year ago and this is for um the first half of the year so overall that's that's at least positive that cash doesn't seem to be a problem for for Dollar General so that's um that's a good thing my main issues with with the with the company though is I think it's just way too big it's it continued to expand at a time where maybe it makes sense to to cut down and to slow down and make make operations more efficient um because dollar generalist had a rough history I mean one of the things that you don't want to be associated with is uh labor issues and people you know being killed at its stores over the past decade so I mean a lot of problems with Dollar General's um locations I mean you've got 20,000 stor 20,000 plus stores you're going to run into issues along the way and in the meantime the company is still aggressively uh pursuing growth and so that that that doesn't make a whole lot of sense to me another thing that doesn't make sense is the fact that it pays a dividend of 1.9% so if it's a growth business I'd expect that you know get rid of the dividend if you want to focus on growth if you want to be a dividend stock fine pay dividend but then slow that growth trying to do both you know hasn't been working for for Dollar General because dividend investors may not want to invest in in a in a stock that you know is aggress is aggressively growing growth investors might not want it because okay it's not putting all of its money behind growth it's also diverting it into a dividend so th those are a couple ways where you know it's it's it's vision is a bit inconsistent and so that's why I'm not I wouldn't be overly thrilled with with buying dollar Jones stock even though it looks cheap at 12.6 times earnings I think until it actually um starts to look at cutting back on on its store count because that's a problem that's plagued um Walgreens as well they've had too many uh too many store locations they've been cutting back um and and especially you got a lot more people buying online and you know Less in store shopping you know this is not a trend that's going to pay off well for Dollar General I don't think because if you look at it you know it's continually investing in new stores so here we've got their their store count as of August 2nd so 20345 stores they've added four o over 400 during the first half the year and again that's that's a bit lower than a year ago but it's still increasing at a fairly High rate so this is a really Capital intensive business the margins are getting worse and it's having issues with you know saying that its customers are are struggling financially so you got to think that you know if there's a possible recession um heading into into next year or slowdown in the economy or things aren't at least getting better then things could get even worse for Dollar General next year so I wouldn't expect that the stock has has hit a bottom or that it's not going to go lower so even if you are interested in this stock I would wait it out just because it could still slide further down especially if heading into next year its numbers um continue to get worse which it's already hinting that you know its customers are not doing well that they are you know financially constrained right and so as long as that's the case you know dollar J is going to be even riskier of a buy than it's already been between it its low margins and its problem and its labor issues so this is a stock that probably you're going to want to um avoid for the time being just because it's got way too many issues um going on and even though it's it seems like it's this this this looks like a potential value trap right now