DOLLAR TREE, INC. (DLTR) stock intrinsic value fair value estimate & owner earnings analysis

Dollar Tree operates roughly 9,300 fixed-price/multi-price variety stores across the U.S. and Canada. Through July 2025 this business was valued as one piece of a larger, two-banner company; it has now sold the Family Dollar chain entirely and stands alone as a pure-play Dollar Tree. Because the two banners had very different economics, we built this valuation only from Dollar Tree's own results (as the company now reports them, with Family Dollar shown separately as a discontinued business), rather than blending in the years when the two were combined. Over the last four fiscal years, Dollar Tree's underlying cash-generating power -- cash from operations, after removing the swings from inventory and payables timing, stock-based compensation, and the ongoing cost of keeping the store base running -- has ranged from about $2.03 to $5.77 per share. That range is wider than we'd like, and the reason is a multi-year store-renovation program (adding coolers and freezers, new fixtures, and an expanded product lineup) that pushed capital spending up sharply in fiscal 2023 and 2024 before falling back in fiscal 2025 as the program wound down. We used the median of the four years, about $4.00 per share, as our starting point, rather than picking the most recent (best) year or the peak-spending (worst) year. Looking forward, the central story is Dollar Tree's multi-price strategy: rather than a single $1 price point, the chain now sells most items at $1.25 with an expanding assortment priced above that, up to $5, while still keeping about 85% of items at $2 or less. This has lifted gross margin (36.4% in fiscal 2025, up from 35.8%) but price increases taken in mid-2025 also cost the company some customer traffic in the back half of the year. At the same time, import tariffs -- roughly half of Dollar Tree's direct-import goods come from China -- have raised costs, and the legal landscape is unsettled: the Supreme Court ruled in February 2026 that one set of tariffs was improperly imposed, and the administration has since applied a different set under other legal authority, so the ultimate cost of imported goods over the next several years is genuinely uncertain. Our base case assumes Dollar Tree keeps opening new stores at roughly its recent pace (it opened over 400 net new stores in fiscal 2025 and still has former Family Dollar real estate to convert), that comparable-store sales grow modestly, and that the multi-price rollout continues to expand margin faster than tariffs erode it -- earnings power growing around 5% a year for a decade. Beyond that we assumed the store base and brand keep renewing themselves through ordinary remodeling (already counted as a cost in our figures) with only slim, sub-inflation growth after that, reflecting a mature, competitive category facing Walmart, Amazon, and other value retailers. On this basis we estimate the shares are worth around $112. Our bear case assumes the tariff and pricing story goes the other way: further cost increases can't be passed through without repeating the traffic losses seen in 2025, so revenue growth stalls near flat and margin stays compressed for years, while running Dollar Tree without the shared scale of Family Dollar's supply chain and overhead structure turns out to cost more than expected. In this case earnings power settles near half of today's level with essentially no growth, which we value at roughly $40 per share. Our bull case assumes the multi-price strategy succeeds without the customer pushback -- better execution, a friendlier tariff resolution, and continued fast store growth -- pushing earnings power up around 9% a year for a decade; that scenario is worth roughly $191 per share. In both the base and bull cases, more than two-thirds of the estimated value comes from what the business is expected to earn beyond the next ten years, which is typical for a company still opening new stores, but it does mean the estimate leans heavily on Dollar Tree remaining a durable format rather than a saturated one. Weighing the size of the gap between our bear and base cases, the margin-of-safety price sits at a meaningful discount to our base-case estimate -- around $61 per share -- to build in a real margin of safety given how unsettled the tariff and pricing situation currently is. Given how much of the near-term picture depends on whether the fiscal 2025 price increases keep costing the company customers, that price also assumes traffic stabilizes for a couple of quarters and the post-Supreme-Court tariff regime becomes clearer. One item we could not fully reconcile from the filing: fiscal 2025 cash from operations included a $41 million net gain on insurance proceeds related to fixed assets and a $93 million 'other non-cash adjustments' line that isn't broken out further; both are treated as non-operating and don't materially change the picture, but we note them for completeness.