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TJX stock rally continues but valuation, technical concerns remain

Writer's picture: Chris Chris

TJX
TJX

TJX (TJX) is an American retailer that offers off-price apparel and home fashion products in the US and other countries. It has over 4,900 stores across its brands like Marmaxx, Homegoods, TJX Canada, and TJX International.


TJX offers its products in its stores and its websites. Most importantly, it leverages a flexible business model that includes opportunistic buying, inventory management, and logistics. This strategy helps it to offer quality brands at an affordable price.


TJX’s business has grown over the past few years, which has made it one of the biggest retail companies in the US. Its annual revenues have soared from $41 billion in 2019 to over $56.42 billion in the trailing twelve months.


TJX’s business has also become more profitable as its net profit jumped from $3.2 billion to $4.8 billion in the same period. As a result, its stock has jumped by 108% in the last twelve months, giving it a market cap of over $141 billion. 


TJX stock was trading at $126, while the HypeIndex has risen to 240%.


TJX HypeIndex
TJX HypeIndex

Positive hype

  • TJX’s hype has increased as the stock continued rising. Its shares have risen to nearly $130, up from $56 in 2019, making it one of the top retail companies in the US. 


  • The company published strong financial results in November, signaling that its business was doing well. Its comparable store sales rose by 3%, helped by rising consumer transactions. 


  • Its pre-tax profit margin rose to 12.3%, a slight improvement and higher than what the company was expecting.


  • TJX also boosted its forward guidance and it now expects that its same store sales to grow by between 2% and 3%. For the year, its same stores will be about 3%.


  • Analysts are optimistic that the company will continue growing this year, with its total revenue expected to grow to $56.24 billion. For next year, revenue is expected to be almost $60 billion. 


  • This growth will partially be driven by its expansion of its business in the South American market through its joint venture with Grupo Axo. TJX owns about 49% of the joint venture. 


  • TJX has also invested in Brands for Less, a company based in Dubai, which runs about 100 stores in the Middle East. It is the only off-price retailer in the region.


  • TJX has continued to return funds to investors through dividends and share buybacks. As a result, the number of outstanding shares has dropped from 1.2 billion in 2021 to 1.12 billion today.

Negative hype

  • There are concerns that the company has become severely overvalued since it has a forward price-to-sales ratio of 30, higher than the sector median of 17.7.


  • The forward EV to EBITDA ratio has moved to 20, also higher than the sector median of 12.


  • There are concerns that the company’s growth will start to slow in the next few years.


  • TJX could be impacted by Donald Trump’s tariffs on goods from China, Mexico, and Canada. 


  • The stock has also formed a rising broadening wedge pattern, a popular bearish pattern.

TJX stock analysis


TJX stock price
TJX stock price

The weekly chart shows that the TJX share price has been in a strong bull run in the past few years. It has remained above the 50-week and 100-week Exponential Moving Averages (EMA).


The stock has recently moved above the key resistance level at $120.60, its highest point in August last year. Oscillators like the Relative Strength Index (RSI) and the MACD indicators have all moved upwards. 


However, the stock has formed a rising broadening wedge pattern, meaning that it could have a pullback in the coming months, potentially in 2025.

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