That’s the case this week with household-name retailer Target (NYSE: TGT).

To get Marc’s take on Target’s dividend, click here.

And to get Anthony’s take on its current valuation, keep reading below.

– James Ogletree, Senior Managing Editor

There’s a strange thing that happens when you become a parent. You start caring about stores you once walked past without a second thought. You know which checkout line is the fastest. You know where everything is. And you know that if you run in for toothpaste, you’ll somehow walk out with a cart full of things you didn’t plan on buying.

That store for many is Target (NYSE: TGT). It’s part of everyday life for millions of families.

But the market doesn’t give out points for mere familiarity. Since early 2024, Target’s stock has slid from above $175 to around $90.

That’s a big drop for a company most of us think of as rock-steady. So the real question is whether this is just a rough patch or a sign of something deeper.

Target reaches nearly 2,000 communities and has become a kind of modern general store. Its same-day pickup and delivery options have turned into a real draw, especially for busy households.

But even a strong brand can’t dodge a strained consumer. Shoppers have tightened up. Traffic is down. Margins are thinner than anyone would like.

The latest quarter reflects that mood. Net sales slipped 1.5% year over year to $25.3 billion. Comparable sales were down 2.7% – mostly because in-store traffic fell – but digital sales grew a bit. Earnings dropped from $1.85 to $1.51 per share, and operating income slid almost 19%.

Still, Target kept returning money to shareholders and now expects full-year earnings between $7.70 and $8.70.

It’s not a disaster. It’s a company pushing through a slow season in the consumer cycle.

When you strip things down to the basics – cash, assets, and consistency – the picture looks clearer.

Target’s enterprise value-to-net asset value ratio sits at 3.74, almost identical to the 3.82 market average. You’re not getting a bargain, but you’re not paying up either.

Where Target still proves itself is in cash generation. Its 6.03% free cash flow-to-NAV rate towers over the 1.12% average. Even in a tough stretch, the company throws off real cash.

Over the last 12 quarters, it grew its free cash flow as often as the typical company in our database.

As you’ve seen, shares have drifted lower for nearly two years and now sit near 2020 levels. Moves like this can tempt bargain hunters, but only when the business is turning a corner.

Target isn’t there yet, honestly. Sales remain soft, margins are still tight, and management is bracing investors for another cautious quarter.

Still, if you shop there often, you know Target hasn’t lost its place in American life.

Good companies sometimes move sideways before they move forward. That’s part of the rhythm of retail. And right now, the market seems to have Target priced about right.

The Value Meter rates Target as “Appropriately Valued.”

What stock would you like me to run through The Value Meter next? Post the ticker symbol(s) in the comments section below.

The post Target: This Iconic Retail Stock Continues to Miss the Mark appeared first on Wealthy Retirement.

The stock’s journey over the past year tells an interesting tale. After peaking near $245 in late 2021, shares tumbled about 60% to around $100 by the fall of 2023 as consumers pulled back on discretionary spending.

More recently, though, the stock has rebounded, reflecting growing investor confidence in retailers.

Let’s examine whether Target represents a good value at current prices by looking at two key metrics.

First, let’s consider the company’s enterprise value relative to its net assets (EV/NAV), which currently sits at 5.39. That’s notably lower than the average of 7.33 among companies with positive net assets. That means you’re paying less for each dollar of Target’s assets than you would for the typical company.

But value investing isn’t just about buying cheap assets – it’s about finding companies that can efficiently turn those assets into cash.

Target has generated positive free cash flow in each of the past four quarters, with its quarterly free cash flow averaging 8.45% of its net assets. That’s slightly better than the 7.9% average among companies with similar cash flow patterns, telling us Target is more efficient than its peers at converting assets into cash.

The company’s third quarter results reinforce both its strengths and its challenges. While guest traffic grew 2.4% and digital sales surged 10.8% during the quarter, operating income fell 11.2% to $1.2 billion due to higher costs. Beauty remained a bright spot with more than 6% growth, while food and essentials saw modest gains.

Management’s outlook appears cautiously optimistic. They expect flat comparable sales in the fourth quarter but maintain their full-year adjusted earnings per share guidance of $8.30 to $8.90. Meanwhile, the company continues to make operational improvements, with its average delivery time now nearly a day faster than it was last year.

When we weigh all these factors, Target’s current valuation looks appropriate. The stock isn’t expensive enough to avoid, but it’s not cheap enough to make it a compelling buy. At $130 per share, you’re paying a fair price for a well-run retailer that’s generating $25.7 billion in quarterly revenue and has a clear strategy for navigating today’s challenging retail environment.

The Value Meter rates Target as “Appropriately Valued.”

What stock would you like me to run through The Value Meter next? Post the ticker symbol(s) in the comments section below.

The post Is It Time to Take Aim at Target Stock? appeared first on Wealthy Retirement.