Is Dollar Tree, Inc. overvalued or undervalued?

As of 26 March 2025, the valuation grade for Dollar Tree, Inc. has moved from risky to expensive, indicating a shift towards a more cautious outlook. The company appears to be overvalued, with a P/E ratio of 18, a Price to Book Value of 5.05, and an EV to EBITDA of 10.97. In comparison, Dollar General Corp. has a higher P/E of 20.09, while Burlington Stores, Inc. shows a significantly elevated P/E of 39.78, further highlighting Dollar Tree's relative position in the retail sector.
Despite a strong return of 31.12% year-to-date, which outpaces the S&P 500's 12.22%, the longer-term performance reveals a concerning trend, with a 3-year return of -30.76% compared to the S&P 500's 70.41%. This divergence suggests that while Dollar Tree may have had a brief rally, its overall valuation does not align with its performance, reinforcing the conclusion that the stock is overvalued.