Financial Analysis Project

Executive Summary:

Project Scope-

Ms. Hogsett and Ms. Nagy, associates with Nava, Seyedin & Drake were tasked with investigating the investment potential of Target Corporation by Toltech, Inc., a Mexican Conglomerate.

Recommendation-

We are recommending Target Corporation, a publicly traded U.S. company in the Retail and Discount Store and Credit Card Segments of the market as an investment for Toltech Inc. for steady returns in a well-known company.

Company Background-

Target has a long history in the retail merchandise industry since its incorporation in 1902. At the beginning of 2011, they owned 1750 stores across the United States with plans to enter the Canadian market with 150 new stores in 2013. Target has established itself as a retailer offering fashionable merchandise at an affordable price. They sell their own and many other exclusive brands in a shopping environment that caters to their customers. Target has recently added SuperTargets with a full-line of food items making shopping even more convenient. The Credit Segment of Target has introduced its own REDcard® rewarding shoppers with a 5% discount on every purchase further strengthing their customer loyalty. They have an on-line presence as well completing their business offering. Target competes primarily with Walmart and Costco in the retail business. Walmart and Costco both offer bottom-end prices. Walmart with lower-end goods and Costco with buy-in-bulk volumes sold in a warehouse environment. Target tries to offer value with "cheap chic" merchandise sold in an environment that caters to their customers. They have built a steady base of loyal shoppers using these measures.

Analysis Highlights-

Target currently has a market capitalization of $35.88B, fourth overall in their sector.1 Over the years they have seen a strong overall increase in net earnings growing to $2,920 million at the end of fiscal 2010. Rate of Return on Total Assets (8.3% in 2010) and Total Equity (18.9% in 2010), both a measure of management's effectiveness and company profitability have risen steadily over the years. Dividends paid out to shareholders have consistently increased and most recently jumped from $0.67 to $0.92 a share. They rank third overall out of twenty in dividends paid, eight in earnings per share and sixth in return on equity.1 Target has maintained healthy solvency ratios with gross profit percentages in the 30% range and debt ratios in the 60% range. Total assets to total liabilities ratios have been respectable between 1.3-1.7 in the last five years. While they are not the leader in any one area, in key areas Target is in the top half of the Retail and Discount Store Segment of the market which will give Toltech Inc. steady returns on their investment. Averaging over the last ten years, Target has beat both its industry peer group as well as the S&P 500 in return on investment, starting with $10,000 in 2000 returning just over $20,000 with yearly dividends reinvested.2

Bottom Line-

Toltech Inc.'s investment in Target Corporation meets their requirements and would be "right on target".

1- Yahoo Finance Website Target Corporation comparisons to Industry. http://finance.yahoo.com/q/in?s=TGT+Industry