The TJX Companies Inc. (TJX), which is headquartered in Framingham, Mass., is a global off-price clothing and home fashion stores operator. The company operates through four business segments: Marmaxx; HomeGoods; TJX Canada; and TJX International. TJX's diversified portfolio of multinational enterprises delivers several growth opportunities.

The company's shares have gained 8.3% in price over the past year to close the last trading session at $63.02. Its strong top-line growth in its last reported quarter, driven by improvement across all business segments, and its solid growth prospects, are expected to propel the company’s performance in the coming months.

Furthermore, the company proved its resilience during the pandemic-induced retail apocalypse by rapidly adapting and expanding its online presence. In addition, TJX’s HomeGoods recently launched its e-commerce platform, which could propel its revenue growth.

Here’s what could shape TJX’s performance in the near term:

Strategic Launch

Last month, TJX-owned HomeGoods, an off-price home decor retailer, launched an online e-commerce platform. The company plans to expand its digital footprint and focus on supporting customers’ easier and faster buying needs. President of TJX Digital US, Mark DeOliveira, said that the new platform "will provide a complementary experience to our stores, allowing shoppers to pair in-store purchases with online finds to bring their vision to life.”

Robust Financials and Profitability

During the second quarter, ended July 31, 2021, TJX's net sales increased 81.1% year-over-year to $12.08 billion. The company reported net income of $785.68 million, compared to a $214.22 million net loss in the prior-year quarter. Its EPS was $0.64, compared to an $0.18 loss per share in the second quarter of 2020. In addition, its cash and cash equivalents grew 7.3% from the year-ago value to $7.11 billion.

TJX’s 9.6% trailing-12-months levered free cash flow margin is 31.3% higher than the 7.3% industry average. Also, the company’s 8.7% trailing-12-months ROA  is 6.3% higher than the 38.9% industry average. Furthermore, its $5.31 billion cash from operations is 2,444.3% higher than the $208.78 million industry average.

Favorable Analyst Estimates

Analysts expect TJX’s revenue to rise 49.7% in its fiscal 2021 and 6.6% next year. Consensus EPS estimates indicate an 851.6% year-over-year improvement in the current year and a 14.6% rise next year. In addition, TJX’s EPS is expected to rise at a 126.2% CAGR over the next five years. The company has an impressive earnings surprise history; it topped the Street’s EPS estimates in three of the trailing four quarters.

Consensus Price Target Indicates Potential Upside

Of the 14 Wall Street analysts that have provided ratings for the stock, 12 rated it Buy, and two rated it a hold. The $86.57 average analyst price target represents a potential 37.4% upside.

POWR Ratings Reflect Solid Prospects

TJX has an overall B grade, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. TJX has an A grade for Sentiment. Its favorable EPS and revenue growth expectations justify the Sentiment grade.

The stock also has a B grade for Growth and Quality. TJX’s solid earnings and revenue growth potential and higher-than-industry ROA are consistent with these grades.

Of the 63 stocks in the A-rated Fashion & Luxury industry, TJX is ranked #12.

Beyond what is stated above, we have graded TJX for Stability, Value, and Momentum. Get all TJX ratings here.

Bottom Line

With the changing preferences of consumers worldwide, and TJX’s continued efforts to adapt and evolve its online platforms to offer better services to its customers, we think the company is well-positioned to see stable growth in the coming quarters. This should raise investors’ hopes surrounding the stock. Thus, the stock could be a solid bet now.

How Does TJX Companies Inc. Stack Up Against its Peers?

TJX has an overall grade of B in our proprietary rating system. This rating is superior to its peers in the Fashion & Luxury industry, such as Nordstrom Inc. (JWN), The Estee Lauder Companies Inc. (EL), Burberry Group Plc (BURBY), which have a C (Neutral) rating.

TJX shares were trading at $63.48 per share on Tuesday morning, up $0.46 (+0.73%). Year-to-date, TJX has declined -6.01%, versus a 17.35% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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