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Is tjx a good investment?

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Answer # 1 #

Over the past 10 years, TJX generated a total return of more than 200% for its investors as the retail apocalypse wiped out many of its industry peers. But will this retail giant remain a good defensive play if the U.S. slips into a recession?

Let's review three reasons to buy TJX -- and one reason to sell it.

TJX has been a beneficiary of the "retail apocalypse" because it buys liquidated inventories from struggling retailers at rock-bottom prices. It relies on more than 1,200 associates to source its products from approximately 21,000 vendors across 100 countries, then sells them to shoppers at 20% to 60% lower prices than full-price retailers such as department stores, specialty retailers, and major online marketplaces like Amazon.

TJX also rapidly rotates its product selections to convince shoppers to regularly visit its stores. That "treasure hunt" strategy further widens its moat against online retailers and superstores and makes it a particularly attractive shopping destination during economic downturns.

The retailer's scale and evergreen business model enabled it to expand even as competitors shuttered their stores to cut costs. Between fiscal 2012 and 2022 (which ended this January), TJX expanded its global store count (across all banners) from 2,905 to 4,689 locations. During that decade, its annual revenue increased at a compound annual growth rate (CAGR) of 7.7% as its adjusted earnings per share (EPS) rose at a 3.7% rate.

TJX's revenue and comparable-store sales (or "comps") declined in fiscal 2021 as it temporarily closed some of its stores throughout the pandemic, but those growth rates quickly accelerated again in a post-lockdown market.

Data source: TJX. YOY =Year-over-year. *Only for open stores during both periods.

For the full year, TJX expects its U.S. comps to rise 1% to 2% on top of its 17% open-store-only comps growth in fiscal 2022. Analysts expect its total revenue to rise 7% in fiscal 2023 and grow another 6% in fiscal 2024.

TJX's gross and pre-tax profit margins plummeted in fiscal 2021 but bounced back the following year. Excluding its recent divestment of Russian retailer Familia following Russia's invasion of Ukraine, its pre-tax profit margin continued to expand in the first quarter of fiscal 2023.

Data source: TJX. *Excluding its divestment of the Russian retailer Familia.

For the full year, TJX expects its adjusted pre-tax profit margin to expand to around 9.7% as its adjusted EPS increases 10% to 12%.

Based on the midpoint of that guidance and its current price of $57, TJX trades at 18 times this year's earnings. By comparison, smaller rival Ross Stores (ROST -1.62%), which is expected to post flat sales growth and a 9% earnings decline this year, trades at 16 times forward earnings.

TJX also pays a forward dividend yield of 2.1%, compared to Ross' forward yield of 1.7%. It's also raised its dividend in 25 of the past 26 years.

TJX has withstood plenty of economic downturns since its IPO in 1987, but it isn't completely immune to the current macroeconomic headwinds.

Inflation will likely squeeze its margins with higher freight costs and wages, and ongoing supply chain disruptions could make it difficult to sustain a stable supply of cheaper overseas products. TJX's total inventories notably rose 22% to $6 billion at the end of fiscal 2022 and then increased another 37% year over year to $7 billion in the first quarter of fiscal 2023.

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Sutapa Doctor
Mapping Technician
Answer # 2 #

TJX Companies has received a consensus rating of Buy.

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Kishwer Mahaley
Sales Floor Stock Clerk
Answer # 3 #

Check out our latest analysis for TJX Companies

According to my valuation model, TJX Companies seems to be fairly priced at around 6.99% above my intrinsic value, which means if you buy TJX Companies today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $70.47, there’s only an insignificant downside when the price falls to its real value. Furthermore, TJX Companies’s low beta implies that the stock is less volatile than the wider market.

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 39% over the next couple of years, the future seems bright for TJX Companies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

Are you a shareholder? TJX’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on TJX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

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Gurpreet Bandekar
REWORKER PRINTED CIRCUIT BOARD