Target Corporation (TGT)

Conclusion

Target Corporation is a US general merchandise retailer that sells apparel, beauty products, groceries, electronics and household goods through its stores and Target.com. At a price of 165.90 USD on 2026-11-09, its market capitalisation is 75.4 billion USD.

The verdict is fair. The fair value band runs from 112.81 to 169.21 USD with a midpoint of 141.01 USD, and the margin of safety is -15.0% at today's price. The P/E of 17.2 compares with a ten-year median of 15.0, the EV/EBITDA of 9.6 with 8.7, and the price to free cash flow of 16.6 with 13.3. The DCF gives 134.84 USD per share at a discount rate of 9.5%, and the fair value from historical multiples is 147.18 USD. The reverse DCF implies revenue growth of 5.2% a year, while revenue grew 2.3% a year over five years and free cash flow per share fell 16.8% a year over the same period.

What holds the case up is a return on invested capital of 15.2% against a WACC of 8.4%, net debt to EBITDA of 1.4x, and free cash flow conversion of 103.6% over the last twelve months. What would break it is the five-year EPS growth of -1.2%, the next-year EPS growth estimate of -9.2%, and a current ratio of 0.99.

Financial health

Financial health is green, held up by an Altman Z-score of 3.37, net debt to EBITDA of 1.4x and interest coverage of 14.2x. The current ratio of 0.99 is neutral, debt to equity is 1.05, and the quick ratio is not available. The Altman Z-score sits in the safe zone, although that model was designed for manufacturers and Target is a retailer. Insolvency risk: low, about 1.1% by the estimate of the Ohlson model over one to two years, based on figures as of 2026-01-31.

Earnings quality

Earnings quality is yellow. Free cash flow conversion is 103.6% over the last twelve months but only 67.9% over five years, and the Piotroski score is 6 out of 9. Share count fell 2.1% a year over five years, which reflects buybacks. The accrual ratio is -4.9%, and stock-based compensation is 0.3% of revenue, leaving free cash flow after it at 4.25 billion USD. The Beneish M-score is not available. Target beat earnings in 6 of the last 8 quarters, with an average surprise of 1.1%. Current-year EPS estimates rose 25.8% over 90 days, with 36 upward revisions and none downward in the last 30 days. The next-year EPS growth estimate is -9.2%, and it rose 6.9% over 90 days.

Profitability

Profitability is green, held up by a return on invested capital of 15.2% against a WACC of 8.39%, which the data places at a surplus of 6.81%. The operating margin is 5.6% against a ten-year median of 5.6%, the gross margin 29.3% against 29.3%, and the net margin 4.1% against 3.9%. The five-year median ROIC is 14.8%. Return on equity is 24.6%, but the DuPont split shows leverage is part of it: a net margin of 3.5%, an asset turnover of 1.76x and an equity multiplier of 3.68x, as of 2026-01-31. The operating margin stability figure is 21.8%.

Growth

Growth is red. Revenue compound growth is -1.3% over three years, 2.3% over five years and 3.6% over ten years, and revenue grew in 6 of 10 comparable years. EPS compound growth is 10.8% over three years, but -1.2% over five years and 4.4% over ten years. Free cash flow per share fell 16.8% a year over five years and 1.1% a year over ten years. The next-year EPS growth estimate of -9.2% points to a further decline in earnings.

Valuation

Valuation is yellow, with a verdict of fair and a margin of safety of -15.0%, meaning the price of 165.90 USD sits above the fair value midpoint of 141.01 USD. Against their ten-year medians, the P/E is 17.2 against 15.0 (a premium of 14.7%), EV/EBITDA is 9.6 against 8.7 (10.6%), price to free cash flow is 16.6 against 13.3 (24.4%), price to sales 0.70 against 0.62 (12.7%), and price to book 4.22 against 4.12 (2.5%). The DCF gives 134.84 USD per share at a discount rate of 9.5%, with 51.4% of its value in the terminal value. The fair value from historical multiples is 147.18 USD. The reverse DCF implies growth of 5.2%, against revenue growth of 2.3% over five years. The fair value is an order-of-magnitude estimate built on fixed assumptions, not a price target. The dividend yield is 2.7%, the forward yield 3.0%, and the payout on free cash flow 45.4%.

Risks

A current ratio below 1 leaves little short-term liquidity cushion, and the quick ratio is not available to check it further. Five-year EPS and free cash flow per share have both fallen, and the next-year EPS estimate points to a further decline of 9.2%. If earnings keep shrinking, the premiums to historical multiples of 12.7% to 24.4% would be harder to justify. The DCF rests on a terminal value share of 51.4%, so small changes in long-term assumptions move the result. The Beneish M-score and the quick ratio are not available. This analysis has no debt maturity schedule and no revenue by segment, so refinancing pressure and the source of sales changes cannot be assessed.