DCF Studio

    TJX · NYQ · Consumer Cyclical

    The TJX Companies, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 82.62

    Market price

    USD 127.24

    Implied upside

    -35.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 3.2% of revenue against depreciation of 1.9%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 82.62-35.1%
    Exit multiple
    USD 126.26-0.8%
    Market price
    USD 127.24

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn6bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 64.3bnUSD 68.5bnUSD 73.0bnUSD 77.8bnUSD 82.8bn+6.5%
    EBITUSD 7.0bnUSD 7.5bnUSD 7.9bnUSD 8.5bnUSD 9.0bn+6.5%
    NOPATUSD 5.5bnUSD 5.9bnUSD 6.3bnUSD 6.7bnUSD 7.1bn+6.5%
    Add depreciation & amortisationUSD 1.2bnUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.6bn+6.5%
    Less capital expenditureUSD -2.0bnUSD -2.2bnUSD -2.3bnUSD -2.5bnUSD -2.6bn+6.5%
    Less increase in working capitalUSD 49.7mUSD 52.9mUSD 56.4mUSD 60.1mUSD 64.0m-6.5%
    Free cashflow to firmUSD 4.7bnUSD 5.1bnUSD 5.4bnUSD 5.7bnUSD 6.1bn+6.5%
    Discount factor0.95980.88420.81450.75030.6912-
    Present valueUSD 4.6bnUSD 4.5bnUSD 4.4bnUSD 4.3bnUSD 4.2bn-1.9%
    Present Value Of The ForecastUSD 21.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.727Reported 0.593, pulled toward 1.0 (Blume)
    Cost of equity9.00%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 140.0bn91.2% of capital
    Total debtUSD 13.5bn8.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.55%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 82.62

    78% of EV

    Forecast FCFF, final year
    USD 6.1bn
    Capex at depreciation, working capital in reinvestment
    USD 7.1bn
    Less reinvestment at g/ROIC (5.7% of NOPAT)
    USD -406.0m
    Capitalised
    USD 6.7bn
    ROIC (reported)
    43.8%
    Terminal value, undiscounted
    USD 113.6bn
    Terminal value, discounted
    USD 78.5bn
    Enterprise value
    USD 100.5bn
    Less net debt
    USD 7.3bn
    Equity value
    USD 93.2bn

    Exit at 17.5x EBITDA

    Value per shareUSD 126.26

    85% of EV

    Terminal value, undiscounted
    USD 184.8bn
    Terminal value, discounted
    USD 127.7bn
    Enterprise value
    USD 149.7bn
    Less net debt
    USD 7.3bn
    Equity value
    USD 142.4bn

    Spread between methods: 42%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.55%105.87115.26126.95141.91161.75
    7.55%87.0693.13100.39109.23120.24
    8.55%73.6077.7782.6288.3395.17
    9.55%63.5066.4969.9073.8378.39
    10.55%55.6557.8760.3663.1866.38

    Outlined: this model. Green text: above today's price of 127.24. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year6.5%16.3%+9.8pp
    EBIT margin10.9%16.1%+5.3pp
    Discount rate8.6%6.5%-2.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.