So consider me converted — if not as a shopper, as a buyer of the stock during the next market sell-off.
It’s all just too tempting: The company is nimble in its marketing (it truly has some of the best ads on TV), provides a neat and clean environment in which to shop, offers a wide array of goods and — most important — contains the “hip” factor of a discounter hiding in “chic” clothing. In fact, it’s even cheaper than Wal-Mart (NYSE:WMT).
Target expects revenue to grow just under 5% this year and move up to nearly 5.5% next year, while earnings estimates top out at over a 13% growth for next year as the company’s Canadian expansion hits full stride. The cost of that expansion, and the margin pressure from increased sales from its REDcard discount program, might weigh on the margins for a little bit longer. But down the road they will both pan out well.
A trailing P/E of 14 and a forward P/E of 12 are nice signs of steady if unspectacular growth — and I’m fine with that, especially since I get a nice 2.3% yield. And with a 28% payout ratio, I expect to see more of the same down the road.
During the next market sell-off, I’ll do my shopping at Target.
— Marc Bastow, InvestorPlace Assistant Editor