Target operates its merchandise by getting into different arrangements with vendors where they do not buy or pay for any merchandise until and unless it is sold to the customer. Target is consistently seen to be in an excellent position to balance and cover their short-term liabilities as their current ratio has averaged 1 . Xx over the past five years (Exhibit 3). Over the years 2010, 2009,and 2008, sales that were made with the Target credit card was averaged typically around $3. 8 billion and accounted for 6. 0% of total sales.
Target has been trying to reduce inventory every year by making complete SE and efficiently using their supply chain, the inventory turnover ratio and days sales outstanding have been reducing throughout as well which shows an improvement in improvement in their statements. The total debt to asset ratio increases tremendously from the year 2010 to 2011 which means that more assets Of Target Corp.. Is financed by the debt in 2011 So that the company’s debt management is in the bad condition recently and the It has more financial risks. The times interest ratio decreases significantly from 2008 to 2009, but it improves from 2010 to 2011 .
This ratio could be interpreted in two ways. On one hand, the Target Corp… ‘s ability to meet its debt obligation is improved in 2011. On the other hand, the higher ratio in 2011 can indicate that paid too much debt with earnings that could be used for projects in order to raise the revenue in the next year. Target Corp… ‘s operating margin is relatively high in 2007. However, it slightly deteriorated recently from 201 0 to 201 1 which means that the company earns less from each dollar of sales. The profit margin has the same situation with the operating margin. Target Corp… Come less profitable in 201 1 and has less control over assets. We can see hat the sales increase from 2010 to 2011, but it does not mean that company improves its profits margin because its costs increases at a higher rate than its sales which leads to the low profits. The return on equity keeps improving since 2008 and it reaches the highest level in 201 1. It shows that Target Corp… Makes more profits in 201 1 by using the money from its shareholders. The high return on equity can attracts more shareholders to invest its company since they can get more returns (Exhibit 1).
Similarly, the return on assets is also really high in 201 1 which shows that Target’s management of assets improves and the company has the ability to make use of its assets to generate profits wisely (Exhibit 2). From the collective data put together targets past five years of PIE and M/B ratios. I then aligned this with the industry averages for each year. The results were somewhat unpromising. Typically a PIE ratio, or price to earnings ratio, represents what the investor should look for in terms of growth in a company, or expected growth. A good average P/E is around 20.
Target’s P/E in 2007 was a strong 18. 35. This was not a figure that is still somewhat promising. In 2008 this dropped to 14. 43 while the industry average remained at 21. 73. This gap in ratio is not something to shrug off. This means that in the year ending in 2008 investors were paying a fairer number for each dollar of earnings. Following this yet again was sass performance, which was extremely low, with a PIE of 10. 19 and an industry average of 15. 97. Dropping to a number this low is promising for investors as this means that they are paying just $10. 9 for every dollar of earnings on the stock. This is about half of the normal industry average therefore making Target stick extremely attractive to the investors. Holistically his decline in PIE shows two things. One being the optimism of the investor in terms of willingness to pay and two, how much the investor will have to pay for each dollar of earnings. Targets decline in PIE displays both of these things and this is reflective of the times surrounding the decline. In 2008 we hit bottom in what was one of the worst mini recessions in a very long time.
In times like those investors are extremely uneasy about the markets, thus driving the P/E down considering the market price of the stock fell. Likewise, investors would have to pay a small price for each dollar of earnings if invested. In terms of the M/B ratio, Target has been somewhat stable throughout the years. They have stayed in the 2-3-area meaning they are consistently slightly undervalued and gain a good return on their assets. In 201 0 for instance they have a M/B of 2. 7, which is very strong proving that they are efficient with their assets as well as return. Exhibit 6). The company’s stock price of the weekly basis reflected the positive situation of the company as the stock price increased moderately in the recent three years (Exhibit 9). I will recommend that we should buy Target stocks due to its aggressive international expansion. In my opinion would value Target Corp… As a “middle-area” company that still needs growth in order to be able to increase its shareholder wealth (Exhibit 8). When looking at Target’s yearly records we can see that its revenue and PEPS have increased from 2008-2012, which does show significant growth.
Although when we look at the quarterly data we can see that the revenue has been flat across the three quarters and the PEPS has went down on the last one. This means that this most recent year the company has been palliating which means that they are not performing as ell as the other top competitors in their industry (Exhibit 7). Like any retailer, Target’s long-term sales and income growth depend largely on the company’s ability to open new stores and expand into new emerging markets.
Target holds large plans to expand into the international market to compete with its main competitor, Wall-Mart. Through global expansion, management choices and consistent us apply chain management Wall-Mart has been able to keep a hold on the top spot. In the recent years Target has been trying to enter the international market, which will increase sales in the future. This will promote the growth of the shareholders wealth and increase their general worth in the investor’s eyes. As previously announced, Target plans to open 124 stores across Canada throughout 2013.
Target Corporation is pushing its efforts to go international to reduce its dependence on the slow growing U. S. Economy, and already has a “large presence in the IS. S. And risks self-centralization if it continues to grow aggressively’ (Treats. Com). With plans to expand into Mexico and Latin America, Target is expanding to Canada first because it is a safe window to start out in; what is popular in the U. S. S likely to be popular in Canada. Targets international market has been increasing sales and revenue making its presence just in the recent months as 6. % of the stock price. This past year Target opened up in new locations in major cities called Citrate to appeal to the city dwellers and urban trend that the market is growing towards. However there is some speculation that Target might be cannibalizing their own sales because their main stores only reside a few miles away from their Citrate stores. They will have to find a way to minimize this loss and provide different product options in order to top themselves from cutting into sales.