Target Corporation Valuation – March 2019 #TGT

Company Profile (excerpt from Reuters): Target Corporation (Target), incorporated on February 11, 1902, is a general merchandise retailer selling products through its stores and digital channels. The Company’s general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items. The Company’s digital channels include a range of general merchandise, including a range of items found in its stores, along with an assortment, such as additional sizes and colors sold only online. The Company’s owned brands include Archer Farms, Market Pantry, Sutton & Dodge, Art Class, Merona, Threshold, Ava & Viv, Pillowfort, up & up, Boots & Barkley, Room Essentials, Wine Cube, Cat & Jack, Simply Balanced, Wondershop, Embark, Smith & Hawken, Xhilaration, Gilligan & O’Malley, Sonia Kashuk, Knox Rose and Spritz.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TGT – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $40,036,461,292 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 27.42% Fail
6. Moderate PEmg Ratio PEmg < 20 14.51 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.60 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -4.10 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.34
MG Growth Estimate 15.00%
MG Value $205.72
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $77.48
MG Value based on 0% Growth $45.42
Market Implied Growth Rate 3.01%
Current Price $77.54
% of Intrinsic Value 37.69%

Target Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.58 in 2016 to an estimated $5.34 for 2020. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.01% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Target Corporation revealed the company was trading above its Graham Number of $51.81. The company pays a dividend of $2.52 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.51, which was below the industry average of 27.69, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-33.33.

Target Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$33.33
Graham Number $51.81
PEmg 14.51
Current Ratio 0.83
PB Ratio 3.60
Current Dividend $2.52
Dividend Yield 3.25%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $12,519,000,000
Total Current Liabilities $15,014,000,000
Long-Term Debt $10,223,000,000
Total Assets $41,290,000,000
Intangible Assets $699,000,000
Total Liabilities $29,993,000,000
Shares Outstanding (Diluted Average) 524,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.51
Jan2019 $5.51
Jan2018 $5.29
Jan2017 $4.69
Jan2016 $5.31
Jan2015 -$2.58
Jan2014 $3.07
Jan2013 $4.52
Jan2012 $4.28
Jan2011 $4.00
Jan2010 $3.30
Jan2009 $2.86
Jan2008 $3.33
Jan2007 $3.21
Jan2006 $2.71
Jan2005 $3.51
Jan2004 $1.76
Jan2003 $1.78
Jan2002 $1.21
Jan2001 $1.38
Jan2000 $1.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.34
Jan2019 $4.72
Jan2018 $3.94
Jan2017 $3.17
Jan2016 $2.58
Jan2015 $1.70
Jan2014 $3.84
Jan2013 $4.08
Jan2012 $3.76
Jan2011 $3.44
Jan2010 $3.14
Jan2009 $3.08
Jan2008 $3.09
Jan2007 $2.85
Jan2006 $2.51
Jan2005 $2.25
Jan2004 $1.57

Recommended Reading:

Other ModernGraham posts about the company

Target Corp Valuation – June 2018 $TGT
Target Corp Valuation – March 2017 $TGT
Target Corp Valuation – August 2016 $TGT
Target Corporation Stock Analysis – 2015 Update $TGT
17 Companies in the Spotlight This Week – June 21, 2014

Other ModernGraham posts about related companies

Dollar Tree Inc Valuation – March 2019 #DLTR
TJX Companies Inc Valuation – February 2019 $TJX
Tractor Supply Co Valuation – February 2019 $TSCO
Tapestry Inc Valuation – February 2019 $TPR
Dollar General Corp Valuation – February 2019 $DG
Tiffany & Co Valuation – February 2019 $TIF
Best Buy Co Inc Valuation – February 2019 $BBY
Macy’s Inc Valuation – January 2019 $M
Ross Stores Inc Valuation – January 2019 $ROST
Walgreens Boots Alliance Inc Valuation – December 2018 $WBA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Target Corp Valuation – June 2018 $TGT

Company Profile (excerpt from Reuters): Target Corporation (Target), incorporated on February 11, 1902, is a general merchandise retailer selling products through its stores and digital channels. The Company’s general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items. The Company’s digital channels include a range of general merchandise, including a range of items found in its stores, along with an assortment, such as additional sizes and colors sold only online. The Company’s owned brands include Archer Farms, Market Pantry, Sutton & Dodge, Art Class, Merona, Threshold, Ava & Viv, Pillowfort, up & up, Boots & Barkley, Room Essentials, Wine Cube, Cat & Jack, Simply Balanced, Wondershop, Embark, Smith & Hawken, Xhilaration, Gilligan & O’Malley, Sonia Kashuk, Knox Rose and Spritz.

TGT Chart

TGT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TGT – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $41,572,798,391 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.90 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 30.66% Fail
6. Moderate PEmg Ratio PEmg < 20 16.97 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.78 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.90 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.51 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.60
MG Growth Estimate 15.00%
MG Value $177.00
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $66.66
MG Value based on 0% Growth $39.08
Market Implied Growth Rate 4.24%
Current Price $78.02
% of Intrinsic Value 44.08%

Target Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.7 in 2015 to an estimated $4.6 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.24% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Target Corporation revealed the company was trading above its Graham Number of $49.41. The company pays a dividend of $2.44 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.97, which was below the industry average of 37.1, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-31.23.

Target Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$31.23
Graham Number $49.41
PEmg 16.97
Current Ratio 0.90
PB Ratio 3.78
Current Dividend $2.44
Dividend Yield 3.13%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $10,876,000,000
Total Current Liabilities $12,044,000,000
Long-Term Debt $11,107,000,000
Total Assets $38,929,000,000
Intangible Assets $0
Total Liabilities $27,771,000,000
Shares Outstanding (Diluted Average) 541,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.10
Jan2018 $5.33
Jan2017 $4.70
Jan2016 $5.31
Jan2015 -$2.58
Jan2014 $3.07
Jan2013 $4.52
Jan2012 $4.28
Jan2011 $4.00
Jan2010 $3.30
Jan2009 $2.86
Jan2008 $3.33
Jan2007 $3.21
Jan2006 $2.71
Jan2005 $3.51
Jan2004 $1.76
Jan2003 $1.78
Jan2002 $1.21
Jan2001 $1.38
Jan2000 $1.23
Jan1999 $0.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.60
Jan2018 $3.95
Jan2017 $3.18
Jan2016 $2.58
Jan2015 $1.70
Jan2014 $3.84
Jan2013 $4.08
Jan2012 $3.76
Jan2011 $3.44
Jan2010 $3.14
Jan2009 $3.08
Jan2008 $3.09
Jan2007 $2.85
Jan2006 $2.51
Jan2005 $2.25
Jan2004 $1.57
Jan2003 $1.42

Recommended Reading:

Other ModernGraham posts about the company

Target Corp Valuation – March 2017 $TGT
Target Corp Valuation – August 2016 $TGT
Target Corporation Stock Analysis – 2015 Update $TGT
17 Companies in the Spotlight This Week – June 21, 2014
Target Corp Annual Valuation – 2014 $TGT

Other ModernGraham posts about related companies

Ulta Beauty Inc Valuation – June 2018 $ULTA
Kohl’s Corporation Valuation – June 2018 $KSS
Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO
Tapestry Inc Valuation – April 2018 $TPR
Dollar General Corp Valuation – April 2018 $DG
Tiffany & Co. Valuation – April 2018 $TIF
Best Buy Co Inc Valuation – April 2018 $BBY
Macy’s Inc Valuation – April 2018 $M

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Target Corp Valuation – March 2017 $TGT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Target Corp (TGT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Target Corporation offers everyday essentials and merchandise to its customers. The Company sells a range of general merchandise and food through its store and digital channels. The Company’s general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items. The Company’s digital channels include a range of general merchandise, including various items found in its stores, along with a complementary assortment, such as additional sizes and colors sold only online. The Company’s brands include Archer Farms, Market Pantry, Threshold, Simply Balanced, Merona, up & up, Boots & Barkley, Room Essentials, Wine Cube, Circo, Smith & Hawken, Xhilaration, Embark, Ava & Viv, Spritz and Sonia Kashuk. The Company’s exclusive brands include C9 by Champion, DENIZEN from Levi’s, Nate Berkus for Target, Cherokee, Fieldcrest, Oh Joy! for Target, Mossimo, Genuine Kids from OshKosh, Shaun White, Kid Made Modern and Hand Made Modern.

TGT Chart

TGT data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TGT – March 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $29,998,053,727 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 36.12% Pass
6. Moderate PEmg Ratio PEmg < 20 15.97 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.84 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -15.36 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $3.45
MG Growth Estimate -1.51%
MG Value $18.93
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $50.05
MG Value based on 0% Growth $29.34
Market Implied Growth Rate 3.74%
Current Price $55.14
% of Intrinsic Value 291.34%

Target Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.84 in 2014 to an estimated $3.45 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.74% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Target Corporation revealed the company was trading above its Graham Number of $41.14. The company pays a dividend of $2.32 per share, for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.97, which was below the industry average of 50.09, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.67.

Target Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$25.67
Graham Number $41.14
PEmg 15.97
Current Ratio 0.94
PB Ratio 2.84
Current Dividend $2.32
Dividend Yield 4.21%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2017
Total Current Assets $11,990,000,000
Total Current Liabilities $12,708,000,000
Long-Term Debt $11,031,000,000
Total Assets $37,431,000,000
Intangible Assets $0
Total Liabilities $26,478,000,000
Shares Outstanding (Diluted Average) 564,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.82
Jan2017 $4.70
Jan2016 $5.31
Jan2015 -$2.56
Jan2014 $3.07
Jan2013 $4.52
Jan2012 $4.28
Jan2011 $4.00
Jan2010 $3.30
Jan2009 $2.86
Jan2008 $3.33
Jan2007 $3.21
Jan2006 $2.71
Jan2005 $3.51
Jan2004 $1.76
Jan2003 $1.78
Jan2002 $1.21
Jan2001 $1.38
Jan2000 $1.23
Jan1999 $0.99
Jan1998 $0.80

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Jan2017 $3.18
Jan2016 $2.59
Jan2015 $1.71
Jan2014 $3.84
Jan2013 $4.08
Jan2012 $3.76
Jan2011 $3.44
Jan2010 $3.14
Jan2009 $3.08
Jan2008 $3.09
Jan2007 $2.85
Jan2006 $2.51
Jan2005 $2.25
Jan2004 $1.57
Jan2003 $1.42
Jan2002 $1.20

Recommended Reading:

Other ModernGraham posts about the company

Target Corporation Stock Analysis – 2015 Update $TGT
17 Companies in the Spotlight This Week – June 21, 2014
Target Corp Annual Valuation – 2014 $TGT
17 Companies in the Spotlight This Week – 3/22/14
Target Corporation (TGT) Quarterly Valuation – March 2014

Other ModernGraham posts about related companies

Foot Locker Inc Valuation – Initial Coverage $FL
Ulta Beauty Inc Valuation – Initial Coverage $ULTA
Kohl’s Corporation Valuation – March 2017 $KSS
Stamps.com Inc Valuation – Initial Coverage $STMP
Kirkland’s Inc Valuation – Initial Coverage $KIRK
Dollar Tree Inc Valuation – February 2017 $DLTR
Staples Inc Valuation – February 2017 $SPLS
Stein Mart Inc Valuation – Initial Coverage $SMRT
J C Penney Company Inc Valuation – Initial Coverage $JCP
TJX Companies Inc Valuation – December 2016 $TJX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Target Corp Valuation – August 2016 $TGT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Target Corp (TGT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Target Corporation offers everyday essentials and merchandise to its customers. The Company sells a range of general merchandise and food through its store and digital channels. The Company’s general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items. The Company’s digital channels include a range of general merchandise, including various items found in its stores, along with a complementary assortment, such as additional sizes and colors sold only online. The Company’s brands include Archer Farms, Market Pantry, Threshold, Simply Balanced, Merona, up & up, Boots & Barkley, Room Essentials, Wine Cube, Circo, Smith & Hawken, Xhilaration, Embark, Ava & Viv, Spritz and Sonia Kashuk. The Company’s exclusive brands include C9 by Champion, DENIZEN from Levi’s, Nate Berkus for Target, Cherokee, Fieldcrest, Oh Joy! for Target, Mossimo, Genuine Kids from OshKosh, Shaun White, Kid Made Modern and Hand Made Modern.

TGT Chart

TGT data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of TGT – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $40,356,659,284 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -24.55% Fail
6. Moderate PEmg Ratio PEmg < 20 22.82 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.57 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 24.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

TGT value chart August 2016

EPSmg $3.08
MG Growth Estimate -3.66%
MG Value $3.67
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $44.73
MG Value based on 0% Growth $26.22
Market Implied Growth Rate 7.16%
Current Price $70.39
% of Intrinsic Value 1919.55%

Target Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.08 in 2013 to an estimated $3.08 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.16% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Target Corporation revealed the company was trading above its Graham Number of $44.15. The company pays a dividend of $2.24 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.82, which was below the industry average of 49.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.21.

Target Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

TGT charts August 2016

Net Current Asset Value (NCAV) -$24.21
Graham Number $44.15
PEmg 22.82
Current Ratio 1.05
PB Ratio 3.57
Current Dividend $2.24
Dividend Yield 3.18%
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 7/1/2016
Total Current Assets $11,503,000,000
Total Current Liabilities $11,003,000,000
Long-Term Debt $12,063,000,000
Total Assets $37,288,000,000
Intangible Assets $0
Total Liabilities $25,711,000,000
Shares Outstanding (Diluted Average) 586,800,000

Earnings Per Share History

Next Fiscal Year Estimate $4.41
Jan2016 $5.31
Jan2015 -$2.56
Jan2014 $3.07
Jan2013 $4.52
Jan2012 $4.28
Jan2011 $4.00
Jan2010 $3.30
Jan2009 $2.86
Jan2008 $3.33
Jan2007 $3.21
Jan2006 $2.71
Jan2005 $3.51
Jan2004 $1.76
Jan2003 $1.78
Jan2002 $1.21
Jan2001 $1.38
Jan2000 $1.23
Jan1999 $0.99
Jan1998 $0.80
Jan1997 $0.48

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.08
Jan2016 $2.59
Jan2015 $1.71
Jan2014 $3.84
Jan2013 $4.08
Jan2012 $3.76
Jan2011 $3.44
Jan2010 $3.14
Jan2009 $3.08
Jan2008 $3.09
Jan2007 $2.85
Jan2006 $2.51
Jan2005 $2.25
Jan2004 $1.57
Jan2003 $1.42
Jan2002 $1.20
Jan2001 $1.12

Recommended Reading:

Other ModernGraham posts about the company

Target Corporation Stock Analysis – 2015 Update $TGT
17 Companies in the Spotlight This Week – June 21, 2014
Target Corp Annual Valuation – 2014 $TGT
17 Companies in the Spotlight This Week – 3/22/14
Target Corporation (TGT) Quarterly Valuation – March 2014

Other ModernGraham posts about related companies

TJX Companies Inc Valuation – August 2016 $TJX
Dollar General Corp Valuation – August 2016 $DG
Coach Inc Valuation – August 2016 $COH
Tiffany & Co Valuation – August 2016 $TIF
Best Buy Co Valuation – July 2016 $BBY
GameStop Corp Valuation – July 2016 $GME
Urban Outfitters Inc Valuation – July 2016 $URBN
Macy’s Inc Valuation – July 2016 $M
Costco Wholesale Corp Valuation – July 2016 $COST
Amazon Inc Valuation – July 2016 $AMZN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Target Corporation Stock Analysis – 2015 Update $TGT

200px-Target_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – June 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Target Corporation (TGT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Target Corporation (Target) is engaged in providing everyday essentials and fashionable, and differentiated merchandise at discounted prices. The Company operates in two segments: U.S. and Canadian. The U.S. Segment includes all of its the United States retail operations, including digital sales. The Canadian segment offers retail operations in Canada. The Company’s owned brands include Archer Farms, Gilligan & O’Malley, Sutton & Dodge, Simply Balanced, Market Pantry, Threshold, Boots & Barkley, Merona, up & up, CHEFS, Room Essentials, Wine Cube, Circo, Smith & Hawken, Xhilaration, Embark and Spritz, among others. Target operates through a network of approximately 1,801 stores. The Company sells an assortment of general merchandise and food. The Company’s general merchandise and City Target stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items.
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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 1/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $83.73
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $33.55
Value Based on 0% Growth $19.67
Market Implied Growth Rate 13.84%
Net Current Asset Value (NCAV) -$20.23
PEmg 36.18
Current Ratio 1.24
PB Ratio 3.82

Balance Sheet – April 2015

Current Assets $13,198,000,000
Current Liabilities $10,648,000,000
Total Debt $12,654,000,000
Total Assets $40,446,000,000
Intangible Assets $0
Total Liabilities $26,272,000,000
Outstanding Shares 646,400,000

Earnings Per Share

2016 (estimate) $4.50
2015 -$2.58
2014 $3.07
2013 $4.52
2012 $4.28
2011 $4.00
2010 $3.30
2009 $2.86
2008 $3.33
2007 $3.21
2006 $2.71

Earnings Per Share – ModernGraham

2016 (estimate) $2.31
2015 $1.70
2014 $3.84
2013 $4.08
2012 $3.76
2011 $3.44

Dividend History

Conclusion:

Target Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the lack of earnings growth or stability over the last five years and the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $3.76 in 2012 to only an estimated $2.31 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 13.84% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value well below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Target Corporation (TGT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Target Corp Annual Valuation – 2014 $TGT

200px-Target_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Target Corp (TGT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Target Corporation sells a range of assortment of general merchandise and food in its stores. The Company’s general merchandise and CityTarget stores offer a food assortment on a smaller scale and its SuperTarget stores offer a line of food items comparable to traditional supermarkets. The Company operates in three segments: U.S. Retail, U.S. Credit Card and Canadian. The Company’s U.S. Retail Segment includes all of its United States merchandising operations. The Company’s U.S. Credit Card Segment offers credit to qualified guests through its credit cards: the Target Credit Card and the Target Visa. Its Canadian Segment includes costs incurred in the United States and Canada related to its Canadian retail market entry. As of February 2, 2013, the Company had 1,778 stores in 49 states and the District of Columbia. It also owns three distribution centers in Canada, with a total of 3,963 thousand square feet.

TGT Chart

TGT data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $58.38
MG Value $42.24
MG Opinion Overvalued
Value Based on 3% Growth $54.52
Value Based on 0% Growth $31.96
Market Implied Growth Rate 3.51%
Net Current Asset Value (NCAV) -$26.09
PEmg 15.53
Current Ratio 0.92
PB Ratio 2.24

Balance Sheet – 5/3/2014

Current Assets $11,023,000,000
Current Liabilities $12,040,000,000
Total Debt $12,612,000,000
Total Assets $44,042,000,000
Intangible Assets $0
Total Liabilities $27,556,000,000
Outstanding Shares 633,610,000

Earnings Per Share

2015 (estimate) $3.60
2014 $3.07
2013 $4.52
2012 $4.28
2011 $4.00
2010 $3.30
2009 $2.86
2008 $3.35
2007 $3.21
2006 $2.71
2005 $2.07

Earnings Per Share – ModernGraham

2015 (estimate) $3.76
2014 $3.84
2013 $4.08
2012 $3.76
2011 $3.45
2010 $3.14

Dividend History
TGT Dividend Chart

TGT Dividend data by YCharts

Conclusion:

Target Corp is not suitable for either the Defensive Investor or the Enterprising Investor.  For the Defensive Investor, the company has a current ratio too low and has not shown sufficient earnings growth over the last ten years.  The Enterprising Investor has concerns with the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.45 in 2011 to only an estimated $3.76 for 2015.  This low level of demonstrated growth does not support the market’s implied estimate of 3.51% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value that is well below the market price.

Be sure to review the previous ModernGraham Valuations of Target Corp (TGT)!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Target Corp (TGT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Target Corp (TGT) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia; this article is not affiliated with the company in any manner.

Target Corporation (TGT) Quarterly Valuation – March 2014

200px-Target_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Target Corporation fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Target Corporation sells a range of assortment of general merchandise and food in its stores. The Company’s general merchandise and CityTarget stores offer a food assortment on a smaller scale and its SuperTarget stores offer a line of food items comparable to traditional supermarkets. The Company operates in three segments: U.S. Retail, U.S. Credit Card and Canadian. The Company’s U.S. Retail Segment includes all of its United States merchandising operations. The Company’s U.S. Credit Card Segment offers credit to qualified guests through its credit cards: the Target Credit Card and the Target Visa. Its Canadian Segment includes costs incurred in the United States and Canada related to its Canadian retail market entry. As of February 2, 2013, the Company had 1,778 stores in 49 states and the District of Columbia. It also owns three distribution centers in Canada, with a total of 3,963 thousand square feet.

TGT Chart

TGT data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $59.67
MG Value $58.16
MG Opinion Fairly Valued
Value Based on 3% Growth $55.65
Value Based on 0% Growth $32.62
Market Implied Growth Rate 3.52%
Net Current Asset Value (NCAV) -$26.46
PEmg 15.55
Current Ratio 0.91
PB Ratio 2.33

Balance Sheet – 2/1/2014

Current Assets $11,573,000,000
Current Liabilities $12,777,000,000
Total Debt $12,622,000,000
Total Assets $44,553,000,000
Intangible Assets $357,000,000
Total Liabilities $28,322,000,000
Outstanding Shares 632,930,000

Earnings Per Share

2014 $3.07
2013 $4.52
2012 $4.28
2011 $4.00
2010 $3.30
2009 $2.86
2008 $3.35
2007 $3.21
2006 $2.71
2005 $2.07
2004 $2.01

Earnings Per Share – ModernGraham

2014 $3.84
2013 $4.08
2012 $3.76
2011 $3.45
2010 $3.14
2009 $2.99

Dividend History

TGT Dividend Chart

TGT Dividend data by YCharts

Conclusion:

Target Corporation is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only requirement that isn’t met is the current ratio, while the Enterprising Investor is satisfied by default since the company is suitable for the more conservative Defensive Investor.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should keep the company on a watch list and feel very comfortable proceeding with further research, including a review of ModernGraham’s valuation of Walmart Stores Inc. (WMT) as well as ModernGraham’s valuation of Costco Wholesale Corporation (COST).  From a valuation perspective, the company appears to be fairly valued currently after growing its EPSmg (normalized earnings) from $3.14 in 2010 to $3.84.  While this is not a strong level of growth, it does support the market’s implied estimate of 3.52% earnings growth, leading the ModernGraham valuation model to return an estimate of intrinsic value that falls within a safety margin in relation to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Target Corporation (TGT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Target Corporation (TGT) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Valuation: Target Corporation (TGT) is Defensive and Fairly Valued

moneyCompany Profile (obtained from Google Finance): Target Corporation sells a range of assortment of general merchandise and food in its stores. The Company’s general merchandise and CityTarget stores offer a food assortment on a smaller scale and its SuperTarget stores offer a line of food items comparable to traditional supermarkets. The Company operates in three segments: U.S. Retail, U.S. Credit Card and Canadian. The Company’s U.S. Retail Segment includes all of its United States merchandising operations. The Company’s U.S. Credit Card Segment offers credit to qualified guests through its credit cards: the Target Credit Card and the Target Visa. Its Canadian Segment includes costs incurred in the United States and Canada related to its Canadian retail market entry. As of February 2, 2013, the Company had 1,778 stores in 49 states and the District of Columbia. It also owns three distribution centers in Canada, with a total of 3,963 thousand square feet.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $65
MG Opinion Fairly Valued
Value Based on 3% Growth $57
Value Based on 0% Growth $34
Market Implied Growth Rate 3.66%
Net Current Asset Value (NCAV) -$27.01
PEmg 15.81
Current Ratio 0.90
PB Ratio 2.45

Balance Sheet – 10/31/2013 

Current Assets $13,153,000,000
Current Liabilities $14,551,000,000
Total Debt $12,665,000,000
Total Assets $46,373,000,000
Intangible Assets $0
Total Liabilities $30,217,000,000
Outstanding Shares 631,760,000

Earnings Per Share – Diluted

2014 (estimate) $3.44
2013 $4.52
2012 $4.28
2011 $4.00
2010 $3.30
2009 $2.86
2008 $3.35
2007 $3.21
2006 $2.71
2005 $2.07
2004 $2.01
2003 $1.5

Earnings Per Share – Modern Graham 

2014 (estimate) $3.96
2013 $4.08
2012 $3.76
2011 $3.45
2010 $3.14
2009 $2.99

Conclusion:

Target Corporation is a strong company that passes almost all of the requirements of the Defensive Investor, having only failed the current ratio test.  By default, the company is also suitable for the Enterprising Investor.  The company is achieving consistent growth while going from an EPSmg (normalized earnings) of $2.99 in 2009 to an estimated $3.96 for 2014.  However, it should be noted that it appears the EPSmg may be dipping slightly in 2014 from its level in 2013.  Assuming this historical growth rate continues, the company seems to be fairly valued by the ModernGraham valuation model, as the market is currently implying a growth rate of 3.66%, which is in line with the historical growth.  As a result, Defensive Investors and Enterprising Investors should feel comfortable proceeding with further research to determine whether Target Corporation is suitable for their individual portfolios.

ModernGraham Valuations of related companies:

What do you think?  Do you agree that Target Corporation is fairly valued?  Is the company suitable for either Defensive Investors or Enterprising Investors?  Leave a comment or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Target Corporation at the time of publication and had no intention of entering into a position within the next 72 hours.

Photo Credit:  Andrew Magill

Nordstrom Inc Valuation – December 2018 $JWN

Company Profile (excerpt from Reuters): Nordstrom, Inc., incorporated on September 28, 1946, is a fashion specialty retailer in the United States. The Company’s segments include Retail and Credit. As of March 20, 2017, the Company operated 344 the United States stores located in 40 states as well as an e-commerce business through Nordstrom.com, Nordstromrack.com/HauteLook and TrunkClub.com. As of January 28, 2017, the Company operated approximately three Nordstrom full-line stores, including two in Canada, and 21 Nordstrom Rack stores. The Company also offers its customers a variety of payment products and services, including credit and debit cards.

JWN Chart

JWN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JWN – December 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,611,864,656 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -0.38% Fail
6. Moderate PEmg Ratio PEmg < 20 17.84 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.28 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.89 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.85
MG Growth Estimate -2.94%
MG Value $7.48
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $41.32
MG Value based on 0% Growth $24.22
Market Implied Growth Rate 4.67%
Current Price $50.82
% of Intrinsic Value 679.67%

Nordstrom, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.54 in 2015 to an estimated $2.85 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.67% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Nordstrom, Inc. revealed the company was trading above its Graham Number of $20.71. The company pays a dividend of $1.48 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.84, which was below the industry average of 28.23, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-18.61.

Nordstrom, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.61
Graham Number $20.71
PEmg 17.84
Current Ratio 1.12
PB Ratio 7.28
Current Dividend $1.48
Dividend Yield 2.91%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $4,297,000,000
Total Current Liabilities $3,842,000,000
Long-Term Debt $2,678,000,000
Total Assets $8,709,000,000
Intangible Assets $249,000,000
Total Liabilities $7,506,000,000
Shares Outstanding (Diluted Average) 172,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.26
Jan2018 $2.59
Jan2017 $2.02
Jan2016 $3.15
Jan2015 $3.72
Jan2014 $3.71
Jan2013 $3.56
Jan2012 $3.14
Jan2011 $2.75
Jan2010 $2.01
Jan2009 $1.83
Jan2008 $2.88
Jan2007 $2.55
Jan2006 $1.98
Jan2005 $1.39
Jan2004 $0.88
Jan2003 $0.33
Jan2002 $0.46
Jan2001 $0.39
Jan2000 $0.73
Jan1999 $0.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.85
Jan2018 $2.78
Jan2017 $2.99
Jan2016 $3.47
Jan2015 $3.54
Jan2014 $3.31
Jan2013 $2.96
Jan2012 $2.62
Jan2011 $2.37
Jan2010 $2.21
Jan2009 $2.24
Jan2008 $2.28
Jan2007 $1.79
Jan2006 $1.28
Jan2005 $0.85
Jan2004 $0.57
Jan2003 $0.46

Recommended Reading:

Other ModernGraham posts about the company

Nordstrom Inc Valuation – February 2018 $JWN
Nordstrom Inc Valuation – May 2016 $JWN
10 Best Stocks For Value Investors This Week – 10/31/15
Nordstrom Inc. Valuation – October 2015 Update $JWN
The Best Companies of the Retail Industry – August 2015

Other ModernGraham posts about related companies

Walmart Inc Valuation – November 2018 $WMT
Canadian Tire Corp Ltd Valuation – August 2018 $TSE:CTC.A
McKesson Corp Valuation – June 2018 $MCK
Big 5 Sporting Goods Corp Valuation – June 2018 $BGFV
Amazon.com Inc Valuation – June 2018 $AMZN
Fossil Group Inc Valuation – June 2018 $FOSL
Costco Wholesale Corp Valuation – June 2018 $COST
Lumber Liquidators Holdings Inc Valuation – June 2018 $LL
CVS Health Corp Valuation – June 2018 $CVS
Target Corp Valuation – June 2018 $TGT

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Walmart Inc Valuation – November 2018 $WMT

Company Profile (excerpt from Reuters): Walmart Inc., formerly Wal-Mart Stores, Inc., incorporated on October 31, 1969, is engaged in the operation of retail, wholesale and other units in various formats around the world. The Company offers an assortment of merchandise and services at everyday low prices (EDLP). The Company operates through three segments: Walmart U.S., Walmart International and Sam’s Club. The Walmart U.S. segment includes the Company’s mass merchant concept in the United States operating under the Walmart brands, as well as digital retail. The Walmart International segment consists of the Company’s operations outside of the United States, including various retail Websites. The Sam’s Club segment includes the warehouse membership clubs in the United States, as well as samsclub.com. The Company operates approximately 11,600 stores under 59 banners in 28 countries and e-commerce Websites in 11 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WMT – November 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $283,384,329,093 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -6.14% Fail
6. Moderate PEmg Ratio PEmg < 20 23.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.58 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.65 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.12
MG Growth Estimate -2.37%
MG Value $15.47
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $59.69
MG Value based on 0% Growth $34.99
Market Implied Growth Rate 7.51%
Current Price $96.84
% of Intrinsic Value 625.79%

Walmart Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.89 in 2015 to an estimated $4.12 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Walmart Inc revealed the company was trading above its Graham Number of $50.28. The company pays a dividend of $2.04 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.52, which was below the industry average of 28.23, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.41.

Walmart Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.41
Graham Number $50.28
PEmg 23.52
Current Ratio 0.81
PB Ratio 3.58
Current Dividend $2.04
Dividend Yield 2.11%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $69,446,000,000
Total Current Liabilities $85,751,000,000
Long-Term Debt $43,275,000,000
Total Assets $226,583,000,000
Intangible Assets $31,044,000,000
Total Liabilities $147,114,000,000
Shares Outstanding (Diluted Average) 2,941,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.26
Jan2018 $3.28
Jan2017 $4.38
Jan2016 $4.57
Jan2015 $5.05
Jan2014 $4.88
Jan2013 $5.02
Jan2012 $4.52
Jan2011 $4.47
Jan2010 $3.71
Jan2009 $3.39
Jan2008 $3.13
Jan2007 $2.71
Jan2006 $2.68
Jan2005 $2.41
Jan2004 $2.07
Jan2003 $1.79
Jan2002 $1.47
Jan2001 $1.40
Jan2000 $1.19
Jan1999 $0.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.12
Jan2018 $4.17
Jan2017 $4.67
Jan2016 $4.82
Jan2015 $4.89
Jan2014 $4.71
Jan2013 $4.49
Jan2012 $4.10
Jan2011 $3.76
Jan2010 $3.31
Jan2009 $3.02
Jan2008 $2.76
Jan2007 $2.50
Jan2006 $2.29
Jan2005 $2.00
Jan2004 $1.73
Jan2003 $1.49

Recommended Reading:

Other ModernGraham posts about the company

Walmart Inc Valuation – February 2018 $WMT
Wal-Mart Stores Inc Valuation – May 2016 $WMT
Dividend Growth Stocks for Intelligent Investors – February 2016
11 Best Stocks For Value Investors This Week – 11/21/15
Wal-Mart Stores Inc. Valuation – November 2015 Update $WMT

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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