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Why the Market Shouldn't Underestimate TJX

The retailer offers an attractive domestic and international growth story and strong free cash flow generation.

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Bridget Weishaar: TJX is currently trading at an 8% discount to our $89 fair value estimate, and we believe that this discount is unjustified. In our opinion, TJX offers investors an attractive domestic and international growth story, strong free cash flow generation, and a proven record of success in both strong and weak economic environments. With its experienced management team, compelling discounted offerings, and competitive advantage in scale and inventory management, we see low risk in strategy or execution.

In our opinion, revenue growth can be sustained through the benefit of scale inherent in access to over 20,000 vendors worldwide, the availability of highly automated distribution centers, and a proprietary inventory management system that allows for local customization of merchandise at more than 4,000 stores. These attributes form the basis for our narrow moat rating. Because merchandise can be obtained from such a wide variety of vendors and proprietary systems allow for differentiation of floor plan and merchandising to match local demand, the target market is broad and allows for expansion to a range of markets. 

Bridget Weishaar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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