TGT 154.94 (+2.41%)
US87612E1064Retail - DefensiveDiscount Stores

Last update on 2024-06-06

Target (TGT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analysis of Target (TGT) using Piotroski F-Score for 2023 reveals a score of 5/9, assessing profitability, liquidity, and operating efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 5

We're running Target (TGT) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

Target's Piotroski F-Score for 2023 is 5 out of 9. This score reflects a mix of strengths and areas for improvement in the company's financial health: 1. Profitability: Target has a positive net income ($2.78 billion) and positive cash flow from operations ($4.018 billion). However, its Return on Assets (ROA) decreased significantly, signaling reduced efficiency. 2. Cash Flow: Target's operating cash flow is higher than its net income, indicating good earnings quality. 3. Liquidity: The company's leverage increased, and its current ratio decreased, indicating increased financial risk and tighter liquidity. 4. Share Issuance: Target reduced its outstanding shares, reflecting a commitment to shareholder value. 5. Efficiency: While Target's gross margin declined, its asset turnover ratio improved, showing better revenue generation from its assets. In summary, Target's financial health exhibits both stability and potential red flags, highlighting the importance of ongoing monitoring and analysis.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 5, Target is in a moderate position. It shows some strong points like positive net income and cash flow, and a commitment to shareholder value through buybacks. However, concerns such as decreased liquidity, higher leverage, and dropping gross margin cannot be ignored. For investors, it's worth looking into Target further, but proceed with caution. Continuous monitoring of financial indicators and market conditions is recommended to ensure a balanced investment decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Target (TGT)

Company has a positive net income?

Net income measures a company's total earnings and profitability. A positive net income reflects the company's ability to generate profit after all expenses and taxes have been deducted.

Historical Net Income of Target (TGT)

In 2023, Target (TGT) reported a net income of $2.78 billion, which is positive. Over the past 20 years, Target has demonstrated a generally consistent trend of positive net income, with the only negative year being 2015, attributed to a net loss of $1.636 billion. This consistency underlines strong operational performance and financial stability. The significant spike in net income to $6.946 billion in 2021 could be attributed to pandemic-driven retail dynamics, while the recent figure aligns more closely with historical averages, suggesting a normalization post-pandemic. Given this, Target earns 1 point for positive net income in 2023.

Company has a positive cash flow?

Cash Flow from Operations (CFO) checks if the company generates sufficient cash from its core business activities. A positive CFO indicates healthy operations.

Historical Operating Cash Flow of Target (TGT)

Target's (TGT) Cash Flow from Operations for 2023 stands at $4.018 billion, which is positive. This results in earning 1 point according to the Piotroski score. However, it's essential to note that while $4.018 billion is positive, it has significantly declined compared to recent peak years such as 2020 ($10.002 billion) and 2021 ($10.525 billion). The downward trend could signal potential underlying operational challenges the company may need to address. Historically, Target has had strong positive CFOs, so maintaining this trend will be crucial for their continued financial health.

Return on Assets (ROA) are growing?

Changes in Return on Assets (ROA) provide insight into a company's effectiveness in generating profits from its assets.

Historical change in Return on Assets (ROA) of Target (TGT)

Target's (TGT) ROA decreased significantly from 0.1322 in 2022 to 0.0519 in 2023, resulting in a score of 0 for this criterion. This decline is unfavorable as it indicates that the company's efficiency in utilizing its assets to generate earnings has deteriorated. Furthermore, when compared to the last 20 years of ROA for Target, the latest figure is one of the lowest, and it is also significantly below the industry median ROA, which has generally hovered between 0.30 and 0.32.

Operating Cashflow are higher than Netincome?

Criterion: Operating cash flow higher than net income—This criterion evaluates the quality of earnings by comparing cash flow from operations to net income. When operating cash flow is higher, it indicates strong earnings quality and financial health since cash flow is less prone to manipulation than net income.

Historical accruals of Target (TGT)

For the fiscal year 2023, Target Corporation's (TGT) operating cash flow stands at $4,018 million, surpassing its net income of $2,780 million. This comparison yields a point for operating cash flow being higher than net income. Observing a trend over the last two decades, it is evident that Target generally maintains operating cash flow higher than net income, affirming the company's strong earnings quality. This robust cash flow performance indicates effective operational management and the firm's ability to convert its earnings into cash, which is pivotal for long-term financial stability. Therefore, under the Piotroski F-Score, Target earns a solid 1 point in this criterion, reflecting a favorable financial standing.

Liquidity of Target (TGT)

Leverage is declining?

Change in leverage examines the shift in a company's financial leverage between two periods. It is essential as higher leverage can indicate increased financial risk.

Historical leverage of Target (TGT)

In 2022, Target’s leverage was 0.2981, which increased to 0.3496 in 2023. This rise indicates a higher financial leverage and suggests an increase in debt relative to equity. Thus, no point is added in Piotroski scoring for change in leverage. Analyzing historically, except mechanistic sharp rises and dips around 2010, leverage levels show inconsistent trends. The spike in 2023 necessitates caution as further debt can strain financial health.

Current Ratio is growing?

The Current Ratio, calculated as current assets divided by current liabilities, measures a company's ability to pay off its short-term liabilities with its short-term assets. A higher current ratio indicates a stronger liquidity position.

Historical Current Ratio of Target (TGT)

The Current Ratio for 2023 is 0.9152, down from 0.992 in 2022. This decline suggests a deterioration in Target’s short-term liquidity. Over the last two decades, Target's current ratio has hovered around the 1 mark, mostly trailing behind the industry median current ratio of around 1.3 to 1.5. A lower-than-industry median current ratio continuously points to relatively tighter liquidity for Target compared to its peers. This trend is not favorable as it might imply increasing difficulty in covering short-term obligations. Therefore, this criterion does not add any points (0) for the Piotroski analysis.

Number of shares not diluted?

This criterion assesses a company's commitment to returning value to its shareholders by repurchasing shares. Decreasing outstanding shares indicate share buybacks, which is generally viewed favorably.

Historical outstanding shares of Target (TGT)

In 2022, Target had 488.1 million outstanding shares, which decreased to 462.1 million in 2023. This reduction in outstanding shares by 26 million points to Target actively buying back its shares over the year. With fewer shares in the market, this move often signals a boost in shareholder value and can positively affect earnings per share (EPS). Consequently, according to the Piotroski score, a reduction in outstanding shares earns Target 1 point for 2023. This positive trend aligns with the company's historical pattern, as evidenced by the chart showing a consistent reduction in outstanding shares over the past two decades, reinforcing Target's commitment to enhancing shareholder value through share buybacks.

Operating of Target (TGT)

Cross Margin is growing?

Changes in gross margin over time.

Historical gross margin of Target (TGT)

Target Corporation (TGT) experienced a significant decline in its gross margin, seeing it fall from 0.2928 in 2022 to 0.2464 in 2023. The gross margin has not increased in 2023, thus earning 0 points in this criteria according to Piotroski analysis. Analyzing a 20-year timeline reveals that Target has been on a downward trajectory regarding its gross margin. This metric peaked around 2004 at 0.3399 and has steadily decreased, often staying below the industry median. The comparison illustrates that not only did Target's gross margin drop in 2023 but it also has been underperforming relative to industry standards consistently.

Asset Turnover Ratio is growing?

Asset turnover ratio measures a company's efficiency in using its assets to generate revenue. It's crucial because higher ratios indicate better performance.

Historical asset turnover ratio of Target (TGT)

Comparing Target's (TGT) asset turnover of 2.0368 in 2023 with the 2.018 in 2022, we observe an improvement. The increase signifies Target's enhanced ability to generate revenue from its assets. Historically, Target's asset turnover fluctuated but has shown an upward trend recently, reaching 2.0368 in 2023. Accruing an asset turnover of over 2 demonstrates significant operational efficiency and improved management, which bodes well for investor confidence. Therefore, this trend is positive, adding 1 point to the Piotroski score.


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