Intrinsic value of Target - TGT

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$50.63

  Intrinsic Value

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  Value-price divergence*

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TGT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 25.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -5.81
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  69,495
  70,885
  72,515
  74,379
  76,471
  78,790
  81,333
  84,103
  87,102
  90,332
  93,799
  97,507
  101,465
  105,678
  110,156
  114,908
  119,944
  125,274
  130,911
  136,867
  143,156
  149,792
  156,789
  164,166
  171,938
  180,123
  188,741
  197,812
  207,358
  217,400
  227,963
Variable operating expenses, $m
 
  61,599
  63,016
  64,635
  66,453
  68,468
  70,679
  73,086
  75,691
  78,498
  81,511
  84,734
  88,173
  91,834
  95,726
  99,855
  104,231
  108,863
  113,762
  118,938
  124,402
  130,169
  136,250
  142,660
  149,414
  156,527
  164,016
  171,899
  180,194
  188,921
  198,100
Fixed operating expenses, $m
 
  4,328
  4,436
  4,547
  4,660
  4,777
  4,896
  5,019
  5,144
  5,273
  5,405
  5,540
  5,678
  5,820
  5,966
  6,115
  6,268
  6,424
  6,585
  6,750
  6,918
  7,091
  7,268
  7,450
  7,636
  7,827
  8,023
  8,224
  8,429
  8,640
  8,856
Total operating expenses, $m
  64,526
  65,927
  67,452
  69,182
  71,113
  73,245
  75,575
  78,105
  80,835
  83,771
  86,916
  90,274
  93,851
  97,654
  101,692
  105,970
  110,499
  115,287
  120,347
  125,688
  131,320
  137,260
  143,518
  150,110
  157,050
  164,354
  172,039
  180,123
  188,623
  197,561
  206,956
Operating income, $m
  4,969
  4,958
  5,064
  5,197
  5,357
  5,545
  5,758
  5,999
  6,266
  6,561
  6,883
  7,234
  7,614
  8,024
  8,465
  8,938
  9,445
  9,987
  10,564
  11,180
  11,835
  12,532
  13,271
  14,056
  14,887
  15,769
  16,702
  17,690
  18,735
  19,840
  21,007
EBITDA, $m
  7,267
  7,300
  7,459
  7,654
  7,883
  8,147
  8,445
  8,777
  9,143
  9,544
  9,981
  10,454
  10,965
  11,514
  12,103
  12,733
  13,406
  14,124
  14,888
  15,700
  16,563
  17,479
  18,449
  19,478
  20,566
  21,718
  22,936
  24,223
  25,583
  27,020
  28,536
Interest expense (income), $m
  999
  386
  403
  424
  447
  473
  502
  534
  568
  606
  646
  689
  735
  785
  837
  893
  952
  1,015
  1,082
  1,152
  1,226
  1,305
  1,387
  1,475
  1,567
  1,664
  1,766
  1,873
  1,986
  2,105
  2,230
Earnings before tax, $m
  3,965
  4,572
  4,660
  4,773
  4,910
  5,072
  5,256
  5,465
  5,698
  5,955
  6,237
  6,545
  6,878
  7,239
  7,628
  8,045
  8,493
  8,971
  9,483
  10,028
  10,609
  11,227
  11,884
  12,581
  13,321
  14,105
  14,936
  15,817
  16,749
  17,734
  18,777
Tax expense, $m
  1,296
  1,235
  1,258
  1,289
  1,326
  1,369
  1,419
  1,476
  1,538
  1,608
  1,684
  1,767
  1,857
  1,955
  2,059
  2,172
  2,293
  2,422
  2,560
  2,708
  2,864
  3,031
  3,209
  3,397
  3,597
  3,808
  4,033
  4,271
  4,522
  4,788
  5,070
Net income, $m
  2,737
  3,338
  3,402
  3,484
  3,585
  3,702
  3,837
  3,990
  4,160
  4,347
  4,553
  4,778
  5,021
  5,285
  5,568
  5,873
  6,200
  6,549
  6,922
  7,321
  7,745
  8,196
  8,675
  9,184
  9,724
  10,297
  10,904
  11,546
  12,226
  12,946
  13,707

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,512
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  37,431
  35,621
  36,440
  37,376
  38,428
  39,593
  40,871
  42,263
  43,770
  45,393
  47,135
  48,999
  50,987
  53,105
  55,355
  57,743
  60,273
  62,952
  65,784
  68,777
  71,938
  75,272
  78,789
  82,495
  86,401
  90,514
  94,845
  99,403
  104,200
  109,246
  114,554
Adjusted assets (=assets-cash), $m
  34,919
  35,621
  36,440
  37,376
  38,428
  39,593
  40,871
  42,263
  43,770
  45,393
  47,135
  48,999
  50,987
  53,105
  55,355
  57,743
  60,273
  62,952
  65,784
  68,777
  71,938
  75,272
  78,789
  82,495
  86,401
  90,514
  94,845
  99,403
  104,200
  109,246
  114,554
Revenue / Adjusted assets
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
Average production assets, $m
  25,073
  25,519
  26,105
  26,776
  27,530
  28,364
  29,280
  30,277
  31,357
  32,519
  33,767
  35,103
  36,527
  38,044
  39,656
  41,367
  43,180
  45,099
  47,128
  49,272
  51,536
  53,925
  56,444
  59,100
  61,898
  64,844
  67,947
  71,212
  74,649
  78,264
  82,067
Working capital, $m
  -718
  -1,559
  -1,595
  -1,636
  -1,682
  -1,733
  -1,789
  -1,850
  -1,916
  -1,987
  -2,064
  -2,145
  -2,232
  -2,325
  -2,423
  -2,528
  -2,639
  -2,756
  -2,880
  -3,011
  -3,149
  -3,295
  -3,449
  -3,612
  -3,783
  -3,963
  -4,152
  -4,352
  -4,562
  -4,783
  -5,015
Total debt, $m
  12,749
  11,526
  12,107
  12,771
  13,516
  14,342
  15,249
  16,235
  17,304
  18,455
  19,690
  21,011
  22,421
  23,922
  25,518
  27,211
  29,005
  30,904
  32,912
  35,034
  37,275
  39,639
  42,132
  44,760
  47,529
  50,445
  53,516
  56,748
  60,149
  63,727
  67,490
Total liabilities, $m
  26,478
  25,255
  25,836
  26,500
  27,245
  28,071
  28,978
  29,964
  31,033
  32,184
  33,419
  34,740
  36,150
  37,651
  39,247
  40,940
  42,734
  44,633
  46,641
  48,763
  51,004
  53,368
  55,861
  58,489
  61,258
  64,174
  67,245
  70,477
  73,878
  77,456
  81,219
Total equity, $m
  10,953
  10,366
  10,604
  10,877
  11,182
  11,521
  11,893
  12,299
  12,737
  13,209
  13,716
  14,259
  14,837
  15,453
  16,108
  16,803
  17,540
  18,319
  19,143
  20,014
  20,934
  21,904
  22,928
  24,006
  25,143
  26,340
  27,600
  28,926
  30,322
  31,791
  33,335
Total liabilities and equity, $m
  37,431
  35,621
  36,440
  37,377
  38,427
  39,592
  40,871
  42,263
  43,770
  45,393
  47,135
  48,999
  50,987
  53,104
  55,355
  57,743
  60,274
  62,952
  65,784
  68,777
  71,938
  75,272
  78,789
  82,495
  86,401
  90,514
  94,845
  99,403
  104,200
  109,247
  114,554
Debt-to-equity ratio
  1.164
  1.110
  1.140
  1.170
  1.210
  1.240
  1.280
  1.320
  1.360
  1.400
  1.440
  1.470
  1.510
  1.550
  1.580
  1.620
  1.650
  1.690
  1.720
  1.750
  1.780
  1.810
  1.840
  1.860
  1.890
  1.920
  1.940
  1.960
  1.980
  2.000
  2.020
Adjusted equity ratio
  0.242
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,737
  3,338
  3,402
  3,484
  3,585
  3,702
  3,837
  3,990
  4,160
  4,347
  4,553
  4,778
  5,021
  5,285
  5,568
  5,873
  6,200
  6,549
  6,922
  7,321
  7,745
  8,196
  8,675
  9,184
  9,724
  10,297
  10,904
  11,546
  12,226
  12,946
  13,707
Depreciation, amort., depletion, $m
  2,298
  2,341
  2,395
  2,457
  2,526
  2,602
  2,686
  2,778
  2,877
  2,983
  3,098
  3,220
  3,351
  3,490
  3,638
  3,795
  3,961
  4,137
  4,324
  4,520
  4,728
  4,947
  5,178
  5,422
  5,679
  5,949
  6,234
  6,533
  6,849
  7,180
  7,529
Funds from operations, $m
  5,222
  5,679
  5,797
  5,941
  6,110
  6,304
  6,523
  6,767
  7,036
  7,331
  7,651
  7,998
  8,372
  8,775
  9,206
  9,668
  10,161
  10,687
  11,246
  11,841
  12,473
  13,143
  13,853
  14,606
  15,403
  16,246
  17,137
  18,079
  19,075
  20,126
  21,236
Change in working capital, $m
  -214
  -31
  -36
  -41
  -46
  -51
  -56
  -61
  -66
  -71
  -76
  -82
  -87
  -93
  -99
  -105
  -111
  -117
  -124
  -131
  -138
  -146
  -154
  -162
  -171
  -180
  -190
  -200
  -210
  -221
  -232
Cash from operations, $m
  5,436
  5,357
  5,833
  5,982
  6,156
  6,355
  6,579
  6,828
  7,102
  7,402
  7,727
  8,080
  8,459
  8,867
  9,305
  9,773
  10,272
  10,804
  11,370
  11,972
  12,611
  13,289
  14,007
  14,768
  15,574
  16,426
  17,327
  18,279
  19,285
  20,347
  21,469
Maintenance CAPEX, $m
  0
  -2,294
  -2,341
  -2,395
  -2,457
  -2,526
  -2,602
  -2,686
  -2,778
  -2,877
  -2,983
  -3,098
  -3,220
  -3,351
  -3,490
  -3,638
  -3,795
  -3,961
  -4,137
  -4,324
  -4,520
  -4,728
  -4,947
  -5,178
  -5,422
  -5,679
  -5,949
  -6,234
  -6,533
  -6,849
  -7,180
New CAPEX, $m
  -1,547
  -509
  -587
  -671
  -753
  -835
  -916
  -997
  -1,079
  -1,163
  -1,248
  -1,335
  -1,425
  -1,517
  -1,612
  -1,711
  -1,813
  -1,919
  -2,029
  -2,144
  -2,264
  -2,389
  -2,519
  -2,655
  -2,798
  -2,947
  -3,103
  -3,266
  -3,436
  -3,615
  -3,803
Cash from investing activities, $m
  -1,473
  -2,803
  -2,928
  -3,066
  -3,210
  -3,361
  -3,518
  -3,683
  -3,857
  -4,040
  -4,231
  -4,433
  -4,645
  -4,868
  -5,102
  -5,349
  -5,608
  -5,880
  -6,166
  -6,468
  -6,784
  -7,117
  -7,466
  -7,833
  -8,220
  -8,626
  -9,052
  -9,500
  -9,969
  -10,464
  -10,983
Free cash flow, $m
  3,963
  2,554
  2,905
  2,916
  2,947
  2,995
  3,061
  3,145
  3,245
  3,362
  3,496
  3,647
  3,814
  3,999
  4,202
  4,424
  4,664
  4,924
  5,203
  5,504
  5,827
  6,172
  6,541
  6,934
  7,354
  7,800
  8,275
  8,780
  9,315
  9,883
  10,486
Issuance/(repayment) of debt, $m
  -664
  495
  581
  664
  745
  826
  906
  987
  1,068
  1,151
  1,235
  1,321
  1,410
  1,501
  1,595
  1,693
  1,794
  1,899
  2,008
  2,122
  2,241
  2,364
  2,493
  2,628
  2,769
  2,916
  3,071
  3,232
  3,401
  3,578
  3,763
Issuance/(repurchase) of shares, $m
  -3,485
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -4,149
  495
  581
  664
  745
  826
  906
  987
  1,068
  1,151
  1,235
  1,321
  1,410
  1,501
  1,595
  1,693
  1,794
  1,899
  2,008
  2,122
  2,241
  2,364
  2,493
  2,628
  2,769
  2,916
  3,071
  3,232
  3,401
  3,578
  3,763
Total cash flow (excl. dividends), $m
  -186
  3,049
  3,486
  3,580
  3,692
  3,821
  3,968
  4,132
  4,313
  4,513
  4,731
  4,968
  5,224
  5,501
  5,798
  6,117
  6,458
  6,823
  7,212
  7,626
  8,067
  8,536
  9,034
  9,563
  10,123
  10,717
  11,346
  12,012
  12,716
  13,461
  14,249
Retained Cash Flow (-), $m
  2,004
  -207
  -238
  -273
  -306
  -339
  -372
  -405
  -438
  -472
  -507
  -542
  -579
  -616
  -655
  -695
  -736
  -779
  -824
  -871
  -920
  -970
  -1,023
  -1,079
  -1,136
  -1,197
  -1,260
  -1,326
  -1,396
  -1,469
  -1,545
Prev. year cash balance distribution, $m
 
  794
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,637
  3,247
  3,308
  3,386
  3,482
  3,596
  3,727
  3,875
  4,041
  4,224
  4,426
  4,646
  4,885
  5,143
  5,422
  5,722
  6,043
  6,387
  6,755
  7,148
  7,566
  8,011
  8,484
  8,986
  9,520
  10,086
  10,685
  11,320
  11,993
  12,704
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
 
  3,454
  2,914
  2,789
  2,668
  2,548
  2,428
  2,305
  2,180
  2,050
  1,917
  1,780
  1,640
  1,498
  1,355
  1,214
  1,075
  940
  811
  690
  579
  477
  387
  308
  241
  184
  138
  101
  72
  50
  34
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Target Corporation operates as a general merchandise retailer. It offers household essentials, including pharmacy, beauty, personal care, baby care, cleaning, and paper products; music, movies, books, computer software, sporting goods, and toys, as well as electronics, such as video game hardware and software; and apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as intimate apparel, jewelry, accessories, and shoes. The company also provides food and pet supplies comprising dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and pet supplies; and home furnishings and décor, including furniture, lighting, kitchenware, small appliances, home décor, bed and bath, home improvement, and automotive products, as well as seasonal merchandise, such as patio furniture and holiday décor. In addition, it offers in-store amenities, including Target Café, Target Photo, Target Optical, Portrait Studio, Starbucks, and other food service offerings. Target Corporation sells products through its stores; and digital channels, including Target.com. As of January 30, 2016, the company operated 1,792 stores in the United States. Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota.

FINANCIAL RATIOS  of  Target (TGT)

Valuation Ratios
P/E Ratio 10.3
Price to Sales 0.4
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 5.2
Price to Free Cash Flow 7.2
Growth Rates
Sales Growth Rate -5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.6%
Cap. Spend. - 3 Yr. Gr. Rate -3.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 100.7%
Total Debt to Equity 116.4%
Interest Coverage 5
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 11.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6%
Return On Equity 22.9%
Return On Equity - 3 Yr. Avg. 12.3%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 29.7%
Gross Margin - 3 Yr. Avg. 29.5%
EBITDA Margin 10.4%
EBITDA Margin - 3 Yr. Avg. 10%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 7%
Pre-Tax Margin 5.7%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. 2.1%
Effective Tax Rate 32.7%
Eff/ Tax Rate - 3 Yr. Avg. 32.7%
Payout Ratio 49.3%

TGT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TGT stock intrinsic value calculation we used $69495 million for the last fiscal year's total revenue generated by Target. The default revenue input number comes from 2017 income statement of Target. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TGT stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.3%, whose default value for TGT is calculated based on our internal credit rating of Target, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Target.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TGT stock the variable cost ratio is equal to 86.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4222 million in the base year in the intrinsic value calculation for TGT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Target.

Corporate tax rate of 27% is the nominal tax rate for Target. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TGT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TGT are equal to 36%.

Life of production assets of 10.9 years is the average useful life of capital assets used in Target operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TGT is equal to -2.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $10953 million for Target - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 493.343 million for Target is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Target at the current share price and the inputted number of shares is $25.0 billion.


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COMPANY NEWS

▶ Why Citi Downgraded Target Stock   [07:38AM  Market Realist]
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▶ A Brief History of Retail   [03:26PM  MarketWatch]
▶ How Amazons Acquisition Could Affect Target   [07:36AM  Market Realist]
▶ What you need to know in markets on Tuesday   [06:34PM  Yahoo Finance]
▶ How Whole Foods helps Amazon fend off Wal-Mart   [Jun-17-17 09:25AM  MarketWatch]
▶ Who can compete with Amazon?   [10:06AM  CNBC Videos]
▶ ETFs with exposure to Target Corp. : June 15, 2017   [Jun-15-17 03:27PM  Capital Cube]
▶ Target's 4% Dividend Yield Just Got a Bump Higher   [Jun-14-17 08:17PM  Barrons.com]
▶ Target raises dividend by 3.3%   [08:14AM  MarketWatch]
▶ Target merges popular apps   [Jun-12-17 10:42AM  Business Insider]
▶ 3 Incredibly Cheap Dividend Stocks   [Jun-10-17 09:00AM  Motley Fool]
▶ Why this community bank has big plans for the East Bay   [Jun-09-17 06:45PM  American City Business Journals]
▶ 3 Reasons Costco Has Membership Fees   [06:00AM  Investopedia]
▶ Amazon Owned the Past Decade   [11:09AM  Investopedia]
▶ Now playing at more Target stores: Background music   [08:56AM  American City Business Journals]
▶ E.l.f. Beauty: Cramer's Top Takeaways   [06:30AM  TheStreet.com]
Stock chart of TGT Financial statements of TGT Annual reports of TGT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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