Dollar Tree's Rising Relative Strength Rating: A Strategic Entry Point for Value-Driven Investors?

Dollar Tree, Inc. (DLTR) has recently captured investor attention with a notable rise in its Relative Strength Rating (RSR) to 76 as of October 15, 2025, up from 70 the prior day, as reported by Investors Business Daily. This metric, which measures a stock's performance relative to the broader market over the past 52 weeks, signals improving momentum for the discount retail giant. But does this upward trend reflect a compelling entry point for investors seeking exposure to a resilient, value-driven retailer? To answer this, we must dissect DLTR's financial trajectory, strategic recalibration, and the broader retail sector dynamics shaping its momentum.

Strategic Momentum: From Tariff Pressures to Operational Resilience

Dollar Tree's Q3 2025 outlook, reaffirmed at its 2025 Investor Day, projects a 3.8% quarter-to-date comparable same-store sales growth, according to Sahm Capital. This resilience is underpinned by strategic initiatives such as the "Dollar Tree 3.0" format, which emphasizes higher-margin products and omnichannel capabilities, and the divestiture of its Family Dollar segment to streamline operations, per a Dollar Tree press release. The company's share repurchase program-$271 million spent on 2.8 million shares quarter-to-date-further signals management's confidence in undervaluation, a point emphasized by Sahm Capital.

However, the path to growth has not been without turbulence. The Investors Business Daily piece highlighted that DLTR's stock declined 13.56% in October 2025, reflecting broader macroeconomic headwinds like inflation and tariffs. Yet, its year-to-date gain of 25.93% and a 34.20% rise over the past year highlight its ability to outperform in a challenging retail environment, as noted by Investors Business Daily. Crucially, DLTR's Q2 2025 adjusted EPS of $0.77-92.5% above expectations-demonstrates its capacity to exceed forecasts even amid cost pressures, according to the company press release.

Retail Sector Context: Discounters Thrive Amid Value-Driven Demand

The retail sector in 2025 is marked by a bifurcation: while traditional retailers like Walmart (WMT) face margin pressures from middle- and high-income shoppers shifting to premium offerings, discounters like Dollar Tree and Dollar General (DG) are capturing value-conscious consumers, per a Refinitiv scorecard. DG, for instance, reported 5.4% same-store sales growth in Q1 2025, driven by 1.9% foot traffic increases, a point also referenced in the Dollar Tree investor materials. This trend underscores a broader consumer shift toward price sensitivity, accelerated by persistent inflation and interest rate hikes.

DLTR's RSR of 76 outperforms the retail sector average (estimated mid-70s based on Q2 2025 efficiency metrics from CSIMarket data) and trails only DG's 82 RSR as of October 2025, according to Investors Business Daily. This positioning reflects DLTR's disciplined approach to margin management and its focus on operational efficiency, such as inventory turnover goals of 4.5 times per year noted in an analysis from Fern Fort University. Meanwhile, the sector's projected mid-single-digit growth in 2025-driven by AI-driven personalization and e-commerce expansion-is consistent with the company's own investor-day commentary.

Valuation Dilemma: Undervalued or Overhyped?

Despite DLTR's operational strengths, valuation debates persist. Sahm Capital argues the stock is undervalued at $109.91, citing margin expansion and multi-price format conversions, a view detailed in Sahm Capital's analysis. Conversely, a discounted cash flow analysis cited by Investors Business Daily implies overvaluation by 53.8%. This gap highlights the tension between DLTR's near-term challenges (e.g., tariff-related costs) and its long-term growth potential. With a forward P/E ratio significantly lower than peers like Costco and TJX-an observation from the company's investor materials-DLTR appears attractively priced for investors willing to stomach short-term volatility.

Investment Thesis: A Calculated Bet on Resilience

For investors, DLTR's RSR of 76 and its strategic momentum present a nuanced opportunity. The company's reaffirmed guidance for 12–15% EPS CAGR through 2028, cited by Sahm Capital, coupled with its ability to outperform peers in earnings surprises as detailed in the Dollar Tree investor materials, suggests a durable growth trajectory. However, risks remain: macroeconomic shifts, such as a slowdown in consumer spending or a reversal in discount retail trends, could pressure margins.

DLTR's recent 27.1% annual gain, noted by Investors Business Daily, and its RSR's ascent to 76 indicate it has already priced in much of its near-term optimism. Yet, for those with a medium-term horizon and a tolerance for volatility, DLTR's undervaluation relative to its operational execution and sector positioning could justify a strategic entry. The key will be monitoring its ability to sustain same-store sales growth and execute its $1.25 price-point strategy amid evolving consumer preferences.

Conclusion

Dollar Tree's rising RSR of 76 is more than a technical indicator-it reflects a company navigating macroeconomic headwinds with strategic agility. While valuation debates persist, DLTR's operational resilience, sector-leading same-store sales, and alignment with value-driven consumer trends position it as a compelling, albeit cautious, bet for investors seeking exposure to a resilient retail model. As the retail sector braces for a Q2 2025 slowdown, noted in the company's investor materials, DLTR's ability to adapt-through innovation, efficiency, and disciplined capital allocation-will determine whether its momentum translates into sustained outperformance.