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Target (TGT) Soars to 52-Week High, Time to Cash Out?
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Shares of Target (TGT - Free Report) have been strong performers lately, with the stock up 11.7% over the past month. The stock hit a new 52-week high of $167.25 in the previous session. Target has gained 28.6% since the start of the year compared to the 38.8% move for the Zacks Retail-Wholesale sector and the 16.3% return for the Zacks Retail - Discount Stores industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 19, 2020, Target reported EPS of $3.38 versus consensus estimate of $1.64 while it beat the consensus revenue estimate by 13.54%.
For the current fiscal year, Target is expected to post earnings of $7.18 per share on $87.94 billion in revenues. This represents a 12.36% change in EPS on a 12.58% change in revenues. For the next fiscal year, the company is expected to earn $7.72 per share on $87.56 billion in revenues. This represents a year-over-year change of 7.56% and -0.43%, respectively.
Valuation Metrics
Target may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Target has a Value Score of C. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 23X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 14.2X versus its peer group's average of 16.5X. Additionally, the stock has a PEG ratio of 3.18. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Target currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Target passes the test. Thus, it seems as though Target shares could still be poised for more gains ahead.
How Does Target Stack Up to the Competition?
Shares of Target have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Big Lots (BIG - Free Report) , Target (TGT - Free Report) , and AutoZone (AZO - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 47% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Target, even beyond its own solid fundamental situation.
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Target (TGT) Soars to 52-Week High, Time to Cash Out?
Shares of Target (TGT - Free Report) have been strong performers lately, with the stock up 11.7% over the past month. The stock hit a new 52-week high of $167.25 in the previous session. Target has gained 28.6% since the start of the year compared to the 38.8% move for the Zacks Retail-Wholesale sector and the 16.3% return for the Zacks Retail - Discount Stores industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 19, 2020, Target reported EPS of $3.38 versus consensus estimate of $1.64 while it beat the consensus revenue estimate by 13.54%.
For the current fiscal year, Target is expected to post earnings of $7.18 per share on $87.94 billion in revenues. This represents a 12.36% change in EPS on a 12.58% change in revenues. For the next fiscal year, the company is expected to earn $7.72 per share on $87.56 billion in revenues. This represents a year-over-year change of 7.56% and -0.43%, respectively.
Valuation Metrics
Target may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Target has a Value Score of C. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 23X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 14.2X versus its peer group's average of 16.5X. Additionally, the stock has a PEG ratio of 3.18. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Target currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Target passes the test. Thus, it seems as though Target shares could still be poised for more gains ahead.
How Does Target Stack Up to the Competition?
Shares of Target have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Big Lots (BIG - Free Report) , Target (TGT - Free Report) , and AutoZone (AZO - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 47% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Target, even beyond its own solid fundamental situation.