TJX Companies Inc Valuation – February 2016 Update $TJX

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 – February 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 TJX Companies Inc (TJX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The TJX Companies, Inc. (TJX) is an off-price apparel and home fashions. The Company operates through four segments: Marmaxx, HomeGoods, TJX Canada and TJX Europe. The Marmaxx and HomeGoods business offers family apparel, home fashions, accent furniture, lamps, rugs, wall decor, decorative accessories and giftware and other merchandise. The TJX Canada offers jewelry and home fashions. TJX Europe operates the T.K. Maxx and HomeSense chains in Europe. The Company operates approximately 3,461 stores in countries, including the United States, Canada, the United Kingdom, Ireland, Germany, Poland, Austria and Australia.


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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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of TJX – February 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 $47,849,528,591 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.55 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 258.93% Pass
6. Moderate PEmg Ratio PEmg < 20 23.87 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.15 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 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.62 Pass
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

TJX value Chart February 2016

EPSmg $2.98
MG Growth Estimate 13.76%
MG Value $107.46
Opinion Undervalued
MG Value based on 3% Growth $43.26
MG Value based on 0% Growth $25.36
Market Implied Growth Rate 7.69%
Current Price $71.22
% of Intrinsic Value 66.28%

TJX Companies Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio as well as the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.56 in 2012 to an estimated $2.98 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.69% 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 above the price.

Stage 3: Information for Further Research

TJX Charts February 2016

Net Current Asset Value (NCAV) -$0.43
Graham Number $21.84
PEmg 23.87
Current Ratio 1.55
PB Ratio 11.15
Dividend Yield 1.08%
Number of Consecutive Years of Dividend Growth 3



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Most Recent Balance Sheet Figures

Balance Sheet Information Oct2015
Total Current Assets $7,348,157,000
Total Current Liabilities $4,730,078,000
Long-Term Debt $1,624,007,000
Total Assets $11,992,433,000
Intangible Assets $342,058,000
Total Liabilities $7,641,972,000
Shares Outstanding (Diluted Average) 680,844,000

Earnings Per Share History

Next Fiscal Year Estimate $3.26
Jan2015 $3.15
Jan2014 $2.94
Jan2013 $2.55
Jan2012 $1.93
Jan2011 $1.65
Jan2010 $1.42
Jan2009 $1.00
Jan2008 $0.83
Jan2007 $0.78
Jan2006 $0.71
Jan2005 $0.61
Jan2004 $0.58
Jan2003 $0.49
Jan2002 $0.46
Jan2001 $0.47
Jan2000 $0.41
Jan1999 $0.32
Jan1998 $0.22
Jan1997 $0.26
Jan1996 $0.02

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.98
Jan2015 $2.71
Jan2014 $2.36
Jan2013 $1.95
Jan2012 $1.56
Jan2011 $1.29
Jan2010 $1.06
Jan2009 $0.84
Jan2008 $0.74
Jan2007 $0.68
Jan2006 $0.61
Jan2005 $0.55
Jan2004 $0.50
Jan2003 $0.45
Jan2002 $0.42
Jan2001 $0.38
Jan2000 $0.30

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies with a Low Beta – January 2016
5 Undervalued Companies with a Low Beta – October 2015
The Best Companies of the Retail Industry – August 2015
5 Undervalued Companies with a Low Beta – August 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15

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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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