TGT: Target Corp
Recent Range: $30/share – $65/share (Current Price: 57.94, as of close of 4/23/10)
Price/Sales (P/S) = 0.68 (0.54, Industry)
Price/Book (P/B) = 2.72 (2.85)
Gross Margin = 30.3% (25.3%)
Pre-Tax Margin = 5.9% (5.3%)
Debt/Equity Ratio = 1.10 (0.61)
Current Ratio = 1.6 (1.1)
Return on Equity = 17.1% (19.4%)
Return on Assets = 5.6% (8.1%)
Return on Capital = 7.4% (12.3%)
Analysis: Obviously, Target is a very well known company.
However, as a stock, Target is in an ultra-competitive big box retail industry, which does not have a lot of upside for its stock holders.
Its profits margins are significantly higher than their competitors, but they seem to get a lower return on their money than much of its competition.
Notice that the Price/Sales is an awesome 0.64, but the industry average is just 0.54. This is a prototypical example of why you check your company’s figures against its competition. Everyone in this industry makes a ton a sales, but many of its sales do not generate a lot of profit.
It pays a dividend, but its barely above 1% annually. This is better than nothing, but I would not buy the stock just for its dividend.
The stock has enjoyed an excellent price surge during the past year, almost doubling its share price. To me, this is too expensive for what you get.
I am also unsure of their direction. They have more debt than most of its competition, but they seem to be stockpiling cash on hand. This could mean they are positioning themselves for an expansion mode where they are waiting to buy the right things at the right price. On the other hand, it could mean that they are unsure what they want to do.
My recommendation is to wait to buy this stock when it becomes less expensive, say under $50/share. If it reaches that price level, check to see if anything changed after today to earn that price reduction.
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