Have you been paying attention to shares of Target (TGT)? Shares have been on the move with the stock up 6.6% over the past month. The stock hit a new 52-week high of $246.98 in the previous session. Target has gained 39.7% since the start of the year compared to the 2.3% move for the Zacks Retail-Wholesale sector and the 11% return for the Zacks Retail - Discount Stores industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 19, 2021, Target reported EPS of $3.69 versus consensus estimate of $2.26 while it beat the consensus revenue estimate by 8.58%.
For the current fiscal year, Target is expected to post earnings of $12.1 per share on $102.11 billion in revenues. This represents a 28.45% change in EPS on a 9.13% change in revenues. For the next fiscal year, the company is expected to earn $12.1 per share on $102.93 billion in revenues. This represents a year-over-year change of -0.05% and 0.8%, respectively.
Valuation Metrics
Target may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Target has a Value Score of C. The stock's Growth and Momentum Scores are C and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 20.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 17X versus its peer group's average of 20X. Additionally, the stock has a PEG ratio of 1.53. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Target currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Target fits the bill. Thus, it seems as though Target shares could have potential in the weeks and months to come.
How Does Target Stack Up to the Competition?
Shares of Target have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Target (TGT), Costco Wholesale (COST), and OReilly Automotive (NASDAQ:ORLY), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 8% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Target, even beyond its own solid fundamental situation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Target Corporation (NYSE:TGT): Free Stock Analysis Report
OReilly Automotive, Inc. (ORLY): Free Stock Analysis Report
Costco Wholesale Corporation (NASDAQ:COST): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research