TJX has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 14.7% to $141.11 per share while the index has gained 11.3%.
Is TJX a buy right now? Find out in our full research report, it’s free.
Why Does TJX Stock Spark Debate?
Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE: TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.
Two Things to Like:
1. Surging Same-Store Sales Show Increasing Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
TJX’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 4.1% per year.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
With $57.93 billion in revenue over the past 12 months, TJX is a behemoth in the consumer retail sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because there is only so much real estate to build new stores, placing a ceiling on its growth. For TJX to boost its sales, it likely needs to adjust its prices or lean into foreign markets.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last six years, TJX grew its sales at a tepid 6.4% compounded annual growth rate. This wasn’t a great result compared to the rest of the consumer retail sector, but there are still things to like about TJX.
Final Judgment
TJX’s merits more than compensate for its flaws, but at $141.11 per share (or 30.2× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
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