Analysis of TJX 2016

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: 22.1

Here you can find the previous analysis of TJX. 

The P/E of TJX is awfully high with 22.1 and the P/B is not much better 11.7 which then gives a very clear no go from Graham. The earnings to sales are a bit low with 7% but the ROE is excellent with over 50%! The book to debt ratio is, for an American company, low with 0.6.

In the last five years they have had an excellent yearly revenue growth rate of 5.9% which then gives us a motivated P/E of 16 to 20 which means that TJX is today slightly overvalued on the market.

They pay a tiny dividend of 1.1% which correspond to almost 25% of their earnings so there is room to increase but I would prefer them not paying this silly little dividend and instead to grow the business faster.

Conclusion: Graham gives a direct no to TJX and I say yes to it based on Lynch principles and not Graham. The P/E, P/B and dividend are all bad but the ROE is excellent and they show a very good growth rate. People are shopping like crazy in their stores and as long as the customers come there then this will also be a good investment. I will keep my shares and will think about if I should increase my holding further.

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