Last update on 2024-06-05

TJX Companies (TJX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Piotroski F-Score Analysis of TJX Companies (TJX) for 2023 shows a solid 7/9 score with detailed financial metrics insights.

Short Analysis - Piotroski Score: 7

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

The Piotroski F-Score analyzes a company based on various financial indicators related to profitability, liquidity, and efficiency. A score of 7 out of 9 is considered good, and it means that TJX Companies has strong financials in these areas. The company is profitable with positive net income and cash flow from operations. The return on assets has improved, and the operating cash flow is higher than net income, indicating robust earnings quality. TJX also reduced its number of shares, showing confidence in its valuation. However, TJX has seen a slight increase in leverage and a decrease in both the current ratio and gross margin. Despite these areas for improvement, the asset turnover ratio has increased, indicating better revenue generation from assets.

Insights for Value Investors Seeking Stable Income

Given the score of 7 out of 9, TJX Companies appears to be a strong and financially sound investment option. The company's consistent profitability, solid cash flow, and efficient asset utilization are all positive indicators. However, potential investors should be mindful of the increasing leverage and weakening liquidity position. Overall, it might be worth looking into TJX as a potentially good investment, especially if its financial performance continues to improve and it addresses its leverage and liquidity concerns.

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

Profitability of TJX Companies (TJX)

Company has a positive net income?

Net income is a crucial indicator of a company's profitability. A positive net income signifies that a company is earning more than it is spending, which is vital for long-term financial health.

In 2023, TJX Companies reported a net income of $3,498,000,000, which is positive. This is a favorable trend for the company, earning it 1 point according to the Piotroski analysis. Looking at the historical data, TJX has consistently shown a positive net income over the past 20 years, with minor exception during 2021 due to pandemic-related disruptions where the net income plummeted to $90,000,000. The positive net income in 2023 indicates a recovery and continued profitability, affirming the company's stable financial performance.

Company has a positive cash flow?

The criterion evaluates if the Cash Flow from Operations (CFO) is positive, indicating the company's ability to generate sufficient revenue to cover operating expenses.

In 2023, TJX Companies reported a Cash Flow from Operations (CFO) of $4,084,000,000, which is indeed positive, thus meeting this criterion and adding 1 point to the Piotroski F-score. Over the last 20 years, TJX has consistently generated positive operating cash flow, demonstrating financial robustness. For example, in 2003, the CFO was $908,560,000, and it has generally trended upward, peaking at $4,562,000,000 in 2021. Such stability and growth in CFO underscore the company's operational efficiency and promise for continued sustainability, which is a positive sign for investors.

Return on Assets (ROA) are growing?

The criterion evaluates the change in the Return on Assets (ROA) year-over-year to measure the company's efficiency in generating profit relative to its total assets. This increase signifies improved management performance and operational efficiency.

In 2023, TJX Companies showed a ROA of 0.1231, an increase from 0.1108 in 2022. This rise is a positive indicator, owing to a 1.23% improvement. The consistent uptick signifies better utilization of the company's assets in generating profit. Adding 1 point for this criterion indicates a well-managed financial performance for the year. This trend is favorable, especially when considering the previous 20 years’ data where the industry's median ROA fluctuated but generally stayed lower compared to TJX's current ROA levels.

Operating Cashflow are higher than Netincome?

This criterion assesses whether the company's operations are generating more cash than its reported net income, indicating high earnings quality.

In 2023, TJX Companies (TJX) reported an Operating Cash Flow of $4,084,000,000 in contrast to a Net Income of $3,498,000,000. Since the Operating Cash Flow exceeds the Net Income, TJX earns 1 point for this criterion. This indicates that the company's operations are robust and capable of generating substantial cash, reflecting strong earnings quality. When evaluating TJX's historical data, it becomes evident that the cash flow from operations consistently outperforms net income, reinforcing this positive trend. For instance, in 2022, the Operating Cash Flow was $3,057,000,000 compared to a Net Income of $3,283,000,000. This trend suggests TJX maintains a consistent ability to convert its earnings into cash, a hallmark of financial health.

Liquidity of TJX Companies (TJX)

Leverage is declining?

Change in leverage compares a company's use of debt to finance its assets year-over-year, reflecting financial health and risk management.

TJX Companies' leverage ratio increased from 0.3841 in 2022 to 0.3751 in 2023. This marks a leveraged increase, which suggests that the company has taken on more debt relative to its equity. Historically, TJX Companies has maintained a relatively conservative leverage ratio, staying below 0.2 for years until a significant jump in 2019. Although the numbers show an increasing trend in leverage over the last few years, the slight increase from 2022 to 2023 indicates higher financial risk. This is crucial for investors because higher leverage can mean higher financial risk. Consequently, this criterion gets a score of 0, reflecting a decline in financial prudence for 2023.

Current Ratio is growing?

The change in current ratio is a valuable financial metric that helps assess a company's short-term liquidity and ability to cover its current liabilities using its current assets.

Comparing TJX Companies' current ratios for 2023 (1.2087) and 2022 (1.2666), we observe a decline in the current ratio. Consequently, TJX does not receive a point for this criterion. This downward trend might indicate a weakening in the company's liquidity position. Historically, TJX's current ratio has fluctuated, with recent values being below both its historical average and the industry median which stands at 1.4722 in 2023. This might signal potential liquidity constraints or strategic adjustments in working capital management.

Number of shares not diluted?

This criterion measures the change in the number of outstanding shares to assess whether the company has engaged in share buybacks.

The outstanding shares for TJX Companies decreased from 1,200,000,000 in 2022 to 1,166,000,000 in 2023. This indicates a reduction in outstanding shares, granting the company 1 point according to the Piotroski F-Score. Historically, TJX has demonstrated a consistent trend of reducing its outstanding shares over the last 20 years, as evidenced by the decline from 2,150,960,000 shares in 2003 to 1,166,000,000 shares in 2023. Share buybacks can be interpreted positively as they often signify management’s confidence in the company's valuation and improve individual shares' value by reducing supply.

Operating of TJX Companies (TJX)

Cross Margin is growing?

Gross Margin measures how much a company retains out of every dollar in revenue after incurring production costs. An increase indicates better cost efficiency.

For TJX Companies (TJX), the Gross Margin in 2023 is 0.2761, a slight decrease from 0.285 in 2022. This trend is not favorable as it indicates a decline in cost efficiency. Over the last 20 years, TJX's Gross Margin has generally trended around the 0.24 to 0.28 range, peaking at 0.2898 in 2017. While this is still below the industry median, which has hovered around 0.34 to 0.41, a decrease from 2022 to 2023 means zero points are added in Piotroski's F-Score for this criterion.

Asset Turnover Ratio is growing?

Asset turnover ratio measures a company's ability to generate sales from its assets. Higher ratios indicate efficient use of assets.

TJX Companies (TJX) saw their asset turnover ratio increase from 1.6381 in 2022 to 1.758 in 2023. This indicates that the company is improving in generating revenue from its assets—certainly a positive trend. This recent increase in asset turnover follows a significant dip to 1.1695 in 2021, reflecting recovery and efficient asset utilization over the past two years. Although this current ratio is still far from the high ratios seen in the mid-2000s (over 3), the improvement from last year is notable, thus scoring 1 point in the Piotroski analysis.