Sunday 19 July 2015

Analysis of TJX

TJX, an American off-price retail chain

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: 22.0

contrarian values of P/E, P/B, ROE as well as dividend for TJX

The P/E of TJX is too high for my liking with 22.0 and the P/B is also no fun with 11.4 which gives a very clear no go from Graham. the earnings to sales are ok with 8% and the ROE is excellent with 52%. The book to debt ratio is at 0.6 which I find a bit low.
In the last five years they have had an excellent yearly revenue growth rate of 5.8% which then gives us a motivated P/E of 16 to 20 which means that TJX is a bit overvalued on the market today.
They pay a tiny dividend in the size of 1.0% which happily only represents 22% of their earnings so there is room for improvement.

Conclusion: Graham says no and I am less certain that I agree with him. The P/E and P/B is indeed far too high for being of interest and the dividend payment is really tiny... but the growth is good and the ROE is excellent and it is almost fairly priced compared to their growth. I need to keep thinking about this one and I would not mind the Euro getting 20% stronger while thinking but I doubt that will happen.

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