Target shares fell by -21.0% during the day's morning session, and are now trading at a price of $122.39. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
a Very Low P/E Ratio but Trades Above Its Graham Number:
Target Corporation operates as a general merchandise retailer in the United States. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.6 and an average price to book (P/B) ratio of 3.19. In contrast, Target has a trailing 12 month P/E ratio of 12.6 and a P/B ratio of 3.92.
Target has moved 19.5% over the last year compared to 29.9% for the S&P 500 — a difference of -10.3%. Target has a 52 week high of $181.86 and a 52 week low of $121.0.
Growing Revenues but Not Enough Current Assets to Cover Current Liabilities:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $75,356 | $78,112 | $93,561 | $106,005 | $109,120 | $107,412 |
| Operating Margins | 5% | 6% | 7% | 8% | 4% | 5% |
| Net Margins | 4% | 4% | 5% | 7% | 3% | 4% |
| Net Income (M) | $2,937 | $3,281 | $4,368 | $6,946 | $2,780 | $4,138 |
| Net Interest Expense (M) | $461 | $477 | $977 | $421 | $478 | $502 |
| Depreciation & Amort. (M) | $2,224 | $2,357 | $2,230 | $2,344 | $2,385 | $2,415 |
| Diluted Shares (M) | 515 | 505 | 489 | 462 | 463 | 464 |
| Earnings Per Share | $5.51 | $6.36 | $8.64 | $14.1 | $5.98 | $8.94 |
| EPS Growth | n/a | 15.43% | 35.85% | 63.19% | -57.59% | 49.5% |
| Avg. Price | $68.28 | $84.79 | $125.33 | $216.57 | $195.92 | $128.01 |
| P/E Ratio | 12.3 | 13.21 | 14.37 | 15.22 | 32.54 | 14.29 |
| Free Cash Flow (M) | $2,457 | $4,090 | $7,876 | $5,081 | -$1,510 | $3,815 |
| CAPEX (M) | $3,516 | $3,027 | $2,649 | $3,544 | $5,528 | $4,806 |
| EV / EBITDA | 7.24 | 7.0 | 7.92 | 10.06 | 16.57 | 8.63 |
| Total Debt (M) | $11,565 | $12,651 | $12,730 | $14,408 | $15,013 | $14,603 |
| Net Debt / EBITDA | 1.67 | 0.95 | 0.8 | 1.19 | 2.1 | 1.35 |
| Current Ratio | 0.83 | 1.05 | 0.97 | 0.86 | 0.86 | 0.86 |
Target has growing revenues and increasing reinvestment in the business and positive EPS growth. Additionally, the company's financial statements display generally positive cash flows and healthy leverage levels. However, the firm suffers from weak operating margins with a stable trend and not enough current assets to cover current liabilities because its current ratio is 0.86.
