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Today I will examine Target Corporation’s (NYSE:TGT) latest earnings update (02 February 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of TGT’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Did TGT perform better than its track record and industry?
TGT’s trailing twelve-month earnings (from 02 February 2019) of US$2.9b has increased by 0.9% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 2.5%, indicating the rate at which TGT is growing has slowed down. What could be happening here? Well, let’s examine what’s transpiring with margins and if the entire industry is experiencing the hit as well.
In terms of returns from investment, Target has invested its equity funds well leading to a 26% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 8.2% is below the US Multiline Retail industry of 8.4%, indicating Target’s are utilized less efficiently. Furthermore, its return on capital (ROC), which also accounts for Target’s debt level, has declined over the past 3 years from 18% to 16%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 78% to 119% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Target gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Target to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TGT’s future growth? Take a look at our free research report of analyst consensus for TGT’s outlook.
- Financial Health: Are TGT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 02 February 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.