Target: A Better Bargain Than Ever?

Target (TGT) investors have seen the company’s stock go through a prolonged downturn over recent months. Unfortunately, this trend appears to be continuing.

On February 28, Target reported earnings that seriously disappointed. The stock fell from $67 to $57.50, and currently sits around ~$59.

Target Stock Price

Source: Yahoo! Finance

It is important to remember that Target’s stock price is not necessarily indicative of the company’s actually per-share value.

Sometimes, stock prices become irrationally disconnected from the value of the underlying business. This is a good thing for the opportunistic investors.

Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
– Warren Buffett

It’s important to remember that Target is a high quality business with a strong history of rewarding shareholders. Target has raised its annual dividend payments for 46 consecutive years, which makes them a member of the elite Dividend Aristocrats (companies with 25+ years of rising dividends).

This article will discuss why Target’s decline presents a buying opportunity, rather than a reason for investors to fear.

Breaking Down the Earnings Release

Upon initial perusal, Target’s earnings report seems fine. Here are a few of the company’s key metrics, as quoted directly from their press release:

  • Fourth quarter comparable sales decreased 1.5 percent, compared to the guidance range of (1.5%) to (1.0%).
  • Fourth quarter comparable digital channel sales increased 34 percent, contributing 1.8 percentage points of comparable sales growth.
  • Fourth quarter GAAP earnings per share (EPS) from continuing operations of $1.46 and Adjusted EPS of $1.45, compared with the Company’s guidance range of $1.45 to $1.55.
  • For full-year 2016, GAAP EPS from continuing operations declined 12.7 percent to $4.58, reflecting a loss of $0.44 on the early retirement of debt.
  • Full-year Adjusted EPS increased 6.7 percent to $5.01.
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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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