TJX Companies Inc (TJX, Financial) recently experienced a daily loss of 3.32% and a 3-month gain of 4.67%, with an Earnings Per Share (EPS) of $3.41. Investors are keen to understand whether the current stock price reflects the company's fair value. This article delves into TJX's valuation, providing investors with a comprehensive analysis to determine if the stock is fairly valued. Read on to explore the insightful valuation analysis that follows.
Company Introduction
TJX Companies Inc (TJX, Financial) is a leading off-price retailer with a unique approach to selling apparel, home fashions, and other merchandise. It operates a vast network of over 21,000 vendors globally, aiming to offer prices 20%-60% lower than regular retailers. With a business model that emphasizes a flexible merchandising network, no-frills stores, and a treasure-hunt shopping experience, TJX has successfully driven margins and inventory turnover. Currently, the company's stock price stands at $89.43, with a market cap of $102.30 billion, juxtaposed against a GF Value of $87.93. This comparison sets the stage for a deeper evaluation of TJX's intrinsic value, blending financial metrics with essential company insights.
Summarize GF Value
The GF Value is a proprietary metric that calculates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. It serves as a benchmark for what the stock's fair trading value should be. TJX (TJX, Financial) is currently perceived as fairly valued according to the GF Value estimation. If a stock trades significantly above this line, it may be overvalued, suggesting a potential decline in future returns. Conversely, a price well below the GF Value Line could indicate a stock with higher future return potential. With TJX's shares trading at $89.43, the company's valuation aligns closely with its business growth rate.
Financial Strength
Assessing a company's financial strength is crucial before investing. Companies with weak financial health are at a higher risk of suffering a permanent loss. TJX's cash-to-debt ratio stands at 0.36, which, although not exceptional, places it in a better position than 56.04% of its peers in the Retail - Cyclical industry. The company's overall financial strength is rated 7 out of 10, indicating a fair level of financial robustness.
Profitability and Growth
Investing in profitable companies, especially those with a consistent track record, presents less risk. TJX has maintained profitability for the last decade, with a solid operating margin of 10.02%, ranking higher than 78.6% of its competitors. The company's profitability score is a robust 8 out of 10. When it comes to growth, TJX's 3-year average revenue growth rate surpasses 62.54% of the industry, though its EBITDA growth rate lags behind, ranking worse than 60.18% of its peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to the capital invested. TJX's ROIC over the past 12 months is an impressive 21.33, well above its WACC of 9.21, indicating the company is effectively creating value for its shareholders.
Conclusion
In conclusion, TJX (TJX, Financial) is assessed to be fairly valued. The company exhibits a solid financial condition and strong profitability. However, its growth ranking is slightly lower than expected within the Retail - Cyclical industry. For a more detailed look at TJX's financials, interested investors can view its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
