Tjx Companies Valuation

Recommendation: Moderate Buy

Price Target: $46 - $50

Current Price: $40

I. Investment Summary

II. Industry Overview

III. Company Overview

IV. Accounting Risks

V. Valuation

Recommendation: MODERATE BUY

Current Price per Share: $40

Intrinsic Value Price per Share: $46 - $50

Increase over Current Price: 15% to 25%

We believe that the TJX Companies is well positioned to outperform its current stock level. The stock is currently trading around $40, while our discounted cash flow analysis yields an intrinsic value of $46 to $50. This intrinsic value is 15 to 20 percent higher than the current stock price, thus affording us a small margin of safety in case the stock does not achieve to its full potential. We would place a moderate BUY rating on the stock and recommend that investors add it to their portfolios.

Investment Thesis

Our investment thesis is based on a strong operational model that is well aligned with the company’s business strategy of providing apparel to consumers at affordable prices; a consistent record of profitability and growth; a history of generating and returning profits to its shareholders; and a competent, experienced executive team.

Operational model aligned with business strategy:

TJX has differentiated its purchasing activities from traditional retailers. While traditional retailers order their merchandise well in advance of when they plan to place these goods in the store, TJX’s merchants purchase throughout the current selling season so that they can follow current trends. This “opportunistic buying” approach allows TJX to negotiate lower purchase prices by offering to buy up suppliers’ excess inventory late in the season. TJX passes these savings along to its customers in the form of lower prices. TJX has also developed a very flexible business model. The selling space in its stores is completely open without walls between departments, which allows TJX to flexibly expand and contract its selling floor...