Target Corporation (NYSE: TGT)
Quality Value Investing Research Report | $TGT Updated Coverage | September 2024
Premium (paying) subscribers can access the Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide when referencing this research report. Unless noted, all data presented is sourced from Charles Schwab & Co. as of the market close on September 10, 2024, and intended for illustration only.
In this updated coverage research report, we’ll reexamine the QVI Stock Picks Real-Time consumer staples sector holding, Target Corp. TGT 0.00%↑, to see if it continues to meet Quality Value Investing’s criteria based on our checklist analysis of the business’s current wealth and the share price’s present value.
Target Corp | Current Wealth
Value Proposition
Target Corporation is a dividend-paying large-cap stock in the consumer staples sector’s multiline retail industry. It was added to the QVI Real-Time Stock Picks on February 13, 2019, at a $63.10 cost basis per share, adjusted for dividends.
Target Corporation operates as a general merchandise retailer in the United States. The company was founded in 1902 and is headquartered in Minneapolis, Minnesota USA.
Economic Moat
Morningstar assigns Target a moat rating of none based on its perception of the company’s lack of competitive durability, cost advantage, and scale as the nation’s seventh-largest retailer.
QVI’s Value Proposition Elevator Pitch for TGT:
Target is the Millennial generation’s favorite place to shop when offline. Of course, Target shoppers also buy online, albeit from their local store’s inventory. Nevertheless, the Bullseye is a comfort zone for the rare millennial on-ground shopping spree.
QVI’s value proposition rating for Target Corp.: Neutral.
Returns on Management
Revenue Growth and Net Profit Margin
Per the table below, Target’s trailing three-year annualized revenue growth was mid-single-digit positive, underperforming the S&P 500 topline growth of 18.2%. Moreover, the company’s revenue growth of -0.7% trailed the broader market’s +4.5% for the most recently reported twelve months.
Further down the income statement, Target had a mid-single-digit positive net profit margin, typical of a retailer, from a 28.4% gross margin, underperforming the S&P 500’s net of 10.8% from a gross of 40.1%.
Returns on Equity and Invested Capital
Target’s senior management produced a double-digit return on equity, or ROE, above QVI’s targeted threshold and the S&P 500’s ROE of 18.2%.
Stock buyback programs often elevate ROE. However, the company has not repurchased shares since the second quarter of 2022.
Target’s return on invested capital, or ROIC, was aligned with QVI’s threshold but lagged the broader market’s 21.6% return. Moreover, the company’s ROIC exceeded its weighted average cost of capital, or WACC, demonstrating that its senior executives are adequate capital allocators. (Source of WACC: GuruFocus)
QVI’s business fundamentals rating for Target Corp.: Bullish.
Next, we’ll look at the company’s returns on management table, its enterprise downsize risks, the stock price’s present value, share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.