Just Buy This Retailer: Target Corporation (TGT)

Page 1 of 2

Target (TGT)Headquartered in Minnesota, Target Corporation (NYSE:TGT), is the second largest discount retailer in the United States. As of March 4, 2013, Target had 1,778 stores in the United States. Apart from its stores, Target Corporation (NYSE:TGT) also sells its general merchandise through its website—Target.com.

Quarterly Earnings

Recently, Target Corporation (NYSE:TGT) announced its earnings for the fourth quarter of 2012. Target reported earnings of $961 million, or $1.47 a share, down from $981 million, or $1.45 per share, a year earlier. The retailer missed its earnings estimates as the number of purchases was down 1%. Gross margin decreased to 27.8% from 28.4% last year.

Food and other basic items did really well, but the gift items didn’t show a lot of promise, especially in the holiday season. It was the worst holiday season for the company since 2008. More customers used their credit / debit cards, which allow a 5% discount to loyal customers. About 15.5% of store purchases were paid through cards, which grew 4.7% from the same quarter last year. Moreover, the discounts offered during the holiday season put a downward pressure on company’s margins.

Going Forward

Target Corporation (NYSE:TGT) has plans of testing its new programs, like letting its customers pay online and collect in-store, delivering items on the same day, and catering to shoppers using mobile phones. Also, the company is about to give its credit card portfolio to Toronto Dominion Bank and will be opening 124 stores in Canada. For the year, Target is expecting its revenues to increase by 2% versus a growth of 5.1% in 2012. Sales at stores open at least a year are estimated to grow by 2.7%.

In this quarter, analysts expect Target Corporation (NYSE:TGT) to earn $1.02 per share on revenues of $17.07 billion. For the full year, analysts’ estimates stand at $4.71 a share on revenues of $75.70 billion.

Valuation

Target is trading at a forward P/E (1yr) of 12.03x and has a PEG of 1.23. Incorporating a dividend yield of 2.20% into its PEG gives us a healthy PEGY of 1.04. Using an industry forward P/E of 15.06x, I would value Target as follows:

Using consensus estimates for the current year, Target’s value comes out to be $71, showing an upside potential of almost 8%. Adding a dividend yield of 2.20% gives a total return of more than 10%.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!