Yahoo Finance How Does TJX Companies Compare to Its Peers on Valuation?
Did TJX Companies’ Fiscal 1Q17 Earnings Beat Estimates?
Current valuation
As of May 18, TJX Companies (TJX) is trading at a 12-month forward PE (price-to-earnings) ratio of 21.0x. The company’s off-price peers Ross Stores (ROST) and Burlington Stores (BURL) are trading at forward PE ratios of 19.3x and 18.1x, respectively, as of May 18. High-end department store Nordstrom (JWN) is trading at a forward PE ratio of 13.0x. Nordstrom derived 32.5% of its fiscal 1Q16 retail sales from its off-price business.
Edge over peers
TJX Companies’ higher valuation is supported by its consistent performance and strong growth prospects. As discussed in the first two parts of this series, TJX Companies reported strong growth in its sales and earnings in fiscal 1Q17, which ended on April 30, 2016.
Fiscal 1Q17 was the 29 th consecutive quarter of same-store sales growth for TJX Companies, which reflects the strength of the company’s off-price business model even during uncertain macro conditions. Also, TJX Companies has a strong international presence in Canada, Europe, and Australia. Its peers Ross Stores and Burlington Stores lack an international presence.
However, the company’s margins are under pressure due to higher wages and growth investments. Currently, analysts expect TJX Companies’ sales and adjusted EPS to grow by 6.9% and 4.5%, respectively, in fiscal 2017, which ends on January 28, 2017.
Growth prospects
TJX Companies sees tremendous opportunity for further expansion of its off-price business. As of April 30, 2016, TJX Companies operates 2,715 US-based stores, including eight Sierra Trading Post stores. The company continues to expand its international presence. In fiscal 1Q17, the retailer opened its 500 th store in Europe. As of the end of fiscal 1Q17, TJX Companies operates 399 stores in Canada, 512 stores in Europe, and 35 stores in Australia. The SPDR S&P 500 ETF (SPY) has 0.3% exposure to TJX Companies.
Supporting the company’s growth is its global buying organization with over 1,000 associates located in 11 countries across four continents. The company has a strong supplier network with over 18,000 vendors in over 100 countries. In the long term, the company sees potential to grow to 5,600 stores.
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