Wednesday 7 June 2017

Analysis of TJX 2017

Logo of TJX 2017

Company: TJX 

ISIN US8725401090 | WKN 854854 

Business: An American off-price apparel and home fashions retailer. They use several store names based on take overs and store concept and in the U.S. they have T.J. Maxx, Marshalls, HomeGoods, Sierra Trading Post and in Canada they have Winners, HomeSense, Marshalls and in Europe they got T.K. Maxx and HomeSense. 

Active: in the US, Canada, the Netherlands, Germany, the UK, Poland, Ireland and Austria.

P/E: 21.6

Here you can find the previous analysis of TJX 2016

Contrarian analysis of TJX 2017

The P/E of TJX is far too high for my liking with 21.6 and the P/B is horrible with over 10 which gives a very clear no from Graham. Earnings to sales seems reasonable with 7% and the ROE is spectacular with over 50%. The book to debt ratio is so, so with 0.5.
In the last five years they have shown a yearly revenue growth rate of 5.1% which is excellent and this then gives us a motivated P/E of 16 to 19 which means that TJX is today slightly overvalued by the market.
They pay a silly dividend in the size of 1.4% which on the good side only correspond to 30% of their earnings so there is room for improvement.

Conclusion: Graham says very clearly no to TJX and I also find it to be too expensive. The P/E is high and so is the P/B with a silly dividend. The only very good one is the ROE value. All this said I will neither sell my shares nor will I buy more so I will remain as a shareholder.


raheel said...

Why TJX and ROST are not affected by retail slowdown, or fear of Amazonization?


Fredrik von Oberhausen said...

Well... they will be affected to a certain extent but their brand will not go out of fashion such as Abercrombie & Fitch has done in the USA or Gerry Weber in Germany. So from my point of view they can always get hold of brands that are in fashion at the moment.
Amazon, Alibaba, Zalando and the likes can indeed become a bigger problem but they have from my point of view problem to sell unique products which you can fairly easy "pretend" to do in a store. The people going to TJX are bargain hunters and they seem to love to go there to see what new things have arrived. For this reason I think TJX (I do not know about ROST) will do fine for the next couple of years also.