TJX Companies Hitting On All Cylinders, But Stock Is Overextended

May. 3.12 | About: TJX Companies (TJX)

TJX Companies (NYSE:TJX) is a leading off-price retailer of clothing, accessories and home fashions primarily under the TJ Maxx and Marshall's brands. The company has grown profits and dividends at a 13-20% pace over the past ten years earning a 30%+ return on equity. TJX should continue this performance because:

(1) the company's business model provides flexibility, improving both sales and margins,

(A) it can alter its product offerings more frequently than traditional retailers, allowing it to stay very close to current market trends,

(B) its opportunistic buying strategy enables it to take advantage price bargains in the marketplace.

(2) new store growth,

(3) e-commerce opportunities,

(4) it operates with a low cost structure emphasizing cost controls, inexpensive store fixtures and obtaining efficiencies in its distribution network and supply chains.

TJX is rated A+ by Value Line, has a 22% debt to equity ratio and its stock yields 1.3%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2003
TJX 1.3% 13% 17% 10
IND* 1.2 9 22 NA
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Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
TJX 22% 43% 1 7% A+
IND* 12 13 NA 5 NA
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*IND is the average of the Retail (Softlines) Industry as compiled from Value Line

Chart

Notes: The TJX stock made great progress off its March 2009 low, quickly surpassing the down trend off its September 2008 high (straight red line) and the November 2008 trading high (green line). The stock is in a long term up trend (blue lines) as well as an intermediate term uptrend (purple lines). The wiggly red line is the 50 day moving average.

The Aggressive Growth Portfolio does not own a position in TJX, having sold its shares when the stock hit its Sell Half Range ($57) in April 2010. Clearly, that was a case of selling way too soon. While the TJX is hitting on all cylinders, the stock is over extended technically and priced fundamentally for no mistakes - hardly a sound reason to buy and just may be a reason to take some money off the table.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.