Shares of Target (
TGT Quick Quote TGT - Free Report) have been strong performers lately, with the stock up 3.9% over the past month. The stock hit a new 52-week high of $213.66 in the previous session. Target has gained 20.3% since the start of the year compared to the -0.1% move for the Zacks Retail-Wholesale sector and the 6.4% return for the Zacks Retail - Discount Stores industry. What's Driving the Outperformance?
The stock has a great 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 March 2, 2021, Target reported EPS of $2.67 versus consensus estimate of $2.53.
For the current fiscal year, Target is expected to post earnings of $8.67 per share on $92.16 billion in revenues. This represents a -7.96% change in EPS on a -1.5% change in revenues. For the next fiscal year, the company is expected to earn $9.61 per share on $95.71 billion in revenues. This represents a year-over-year change of 10.88% and 3.85%, respectively.
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 is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort 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. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Target has a Value Score of B. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 24.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 14.7X versus its peer group's average of 19.3X. Additionally, the stock has a PEG ratio of 2.4. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Target currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
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 fits the bill. Thus, it seems as though Target shares could have potential in the weeks and months to come.
How Does Target Stack Up to the Competition?
Shares of Target have been rising, 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 Target (
TGT Quick Quote TGT - Free Report) , OReilly Automotive ( ORLY Quick Quote ORLY - Free Report) , and RH ( RH Quick Quote RH - 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.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Target. Still, the fundamentals for Target are promising, and it still has potential despite being at a 52-week high.