The TJX Companies (TJX)

Total return at 5 years: 1.9%/year = 0.2% appreciation + 1.7% dividend. The target price ($143) is ex-dividend; the $12 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $129 · Multiples $125) is below the market price ($142).

Today — expensive, no margin of safety: at $142 trades ~13.2% above its value discounted to today (~$125); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Preserva valor: the target price ($143) plus dividends yield just enough to preserve nominal capital, below the required 4% floor.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$79.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($142) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (7.1%/year) above our base case (5.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$7.3 bn of owner earnings in year 5 (vs ~$6.6 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on Resultado operativo (EV/EBIT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

TJX is valued at the enterprise level on EV/EBIT over operating income, with cash and debt in the bridge, in line with a quality specialty retailer. The company holds a net cash position ($6,004 million of cash against $2,871 million of total debt, with net interest income rather than expense), so net income already incorporates the full financial result and no additional enterprise-value-to-equity bridge is needed. Year-0 is the trailing twelve months ended August 1, 2026, built by levels from the second-quarter fiscal 2027 communiqué (8-K of August 19, 2026): net sales of $62,363 million and reported pre-tax income of $8,045 million. That year-0 is normalized for two quantified items, both pushing in the same direction: the non-recurring $221 million pre-tax gain from the card interchange-fee litigation, recognized in the fourth quarter of fiscal 2026 and still within the window, and the $0.14 per share net benefit from tariff refunds collected in the second quarter — about $208 million pre-tax — which the company explicitly breaks out in its own communiqué. Normalized, trailing-twelve-month pre-tax income comes to $7,616 million, a 12.21% margin, and net income to $5,735 million (a 9.20% margin). Year 1 anchors on the raised guidance from the same communiqué, taken in its adjusted form because that is the version that excludes those refunds: consolidated comparable sales growing 3% to 4%, adjusted pre-tax margin of 12.0% to 12.1% (raised from 11.9%-12.0%) and adjusted diluted EPS of $5.15 to $5.20 (raised from $5.08-5.15). On the rolling window that works out to revenue growth of 4.4% and a pre-tax margin of 12.11%, just below the normalized year-0: guidance is deliberately conservative on the second half. The path decelerates smoothly toward a 4.8% terminal rate, supported by the acceleration of store openings the company announced in this same communiqué — moving to 4% annual store growth starting in fiscal 2028 and raising its long-term global target by 500 locations, to 7,500 versus the current 5,285. The exit multiple sits in the mid-to-upper part of the archetype's band (16 to 22 times), reflecting a return on capital well above the 10% bar and a stable moat, but falling short of the ceiling given that this is an apparel and home-goods business exposed to the discretionary consumer cycle. Buybacks are modeled with an explicit share path of 1.0% annually, the net reduction revealed between the second quarter of fiscal 2026 (1,128 million diluted shares) and that of fiscal 2027 (1,117 million), rather than what the $2,796 million repurchased over the trailing twelve months would imply: the difference is compensation-related issuance and the price at which shares were repurchased.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $143 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $142, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $143 in 5 years plus $12 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $125. Against the current market price ($142), the margin of safety is -13.2% (trades above the maximum → a premium is paid) and the total return at that price would be 1.9% annually.

• Entry multiple. The current price implies an earnings multiple above the midpoint of the quality specialty-retail band.
• Margin of safety. At the archetype's disciplined exit multiple, the 5-year value falls below the market price.
• Dividend yield. The dividend yield at the current price is modest, around 1.2%.
• Historical comparison. The current multiple is at the upper end of the range TJX has traded at in recent years.
• Business quality vs price. It is an excellent business, but the price already prices in much of that quality.
• Multiple sensitivity. A multiple compression, even with the business executing well, would outweigh earnings growth.
• Adverse scenario. In the adverse scenario the expected return is clearly negative, which demands entry discipline.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (113%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. Well above the 10% bar, sustained by the efficient working capital typical of off-price.
• Cash generation. TTM operating cash flow of US$7.6 billion, consistently above net income.
• Cash conversion. Earnings-to-cash conversion is solid and stable year over year.
• Capital intensity. TTM capex is barely ~3.4% of revenue, typical of a low-capital business.
• Stock-based compensation. Stock-based compensation expense is barely ~0.4% of revenue, with no material distortion to earnings.
• Predictability. Margins and growth have historically been stable, with the company's own guidance met or exceeded.
• Inventory risk. "Packaway" inventory and opportunistic buying demand good buyer judgment; an error directly hits margin.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

TJX's growth breaks down into new store openings (~3% a year, with long-term potential of 7,000 stores versus the current 5,262) and comparable sales (customer traffic times average purchase amount), driven by the availability of branded merchandise at clearance prices. E-commerce is barely ~2% of sales and is not today a meaningful growth driver, unlike a marketplace where online GMV dominates the equation.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (01-ago-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Revenue growth. TTM revenue +8.1% year over year, with fiscal 2027 guidance of comp sales +3% to +4%.
• Comparable sales. +5% in fiscal 2026 and +6% in the first quarter of fiscal 2027, both above plan.
• Store expansion. Store count and selling square footage growing ~3% a year, with long-term potential of 7,000 stores.
• E-commerce. Barely ~2% of total sales; an underdeveloped channel versus more digital competitors.
• International expansion. TJX International added Spain in March 2026 and grew +11% in revenue in fiscal 2026.
• Raised guidance. The company raised its sales, margin and earnings-per-share guidance for fiscal 2027 after a first quarter above plan.
• Sensitivity to the consumer cycle. Growth depends on the consumer sustaining discretionary spending on apparel and home goods.

• Business model. Off-price retail of apparel and home goods, relatively capital-light, with more than 5,200 stores across ten countries.
• Demand recurrence. The value proposition drives frequent, repeat visits, typical of a "treasure hunt" format.
• Product differentiation. Branded merchandise at prices 20%-60% below regular, with an assortment that changes daily.
• Market position. The largest off-price retailer in the United States and in Europe by store count.
• Pricing power. The model applies no promotional discounts; the low price is the permanent proposition, not an adjustable upward lever.
• Operating leverage. Moderate margin expansion via buying scale and logistics efficiency, without aggressive capex bets.
• Behavior in recessions. The off-price format has historically drawn more traffic when consumers seek value.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• –Interest coverage (EBIT / interest)no data
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 113% of ROIC
• ✓Value creation (ROIC − 10% bar)+65pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.6x
• ✓Float / working capitalFrees up cash $0.3 bn (float / negative WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.4% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Cash position. Cash and equivalents of US$5.6 billion at quarter close, with a positive net cash position.
• Leverage. Total debt of ~US$2.9 billion, moderate relative to annual cash generation.
• Interest coverage. TJX generates net interest income rather than net expense, given its net cash position.
• Operating liquidity. Efficient working capital, typical of the off-price model with high inventory turnover.
• Lease commitments. Operating lease liabilities are significant given the 100%-leased store model.
• Financial flexibility. Cash generation sustains dividends, buybacks and investment simultaneously, without leveraging the balance sheet.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO tenure. Ernie Herrman has spent 37 years at the company and eight as chief executive, with deep internal merchandising experience.
• Capital allocation. Split between moderate reinvestment, sustained buybacks and a growing dividend, with no significant acquisitions.
• Insider ownership. Directors and executives own a very small fraction of shares; effective control rests with institutional investors.
• Dividend track record. Dividend per share has been growing at a double-digit pace in recent years.
• Market communication. Guidance raised after an above-plan quarter, in line with a historical pattern of conservative guidance.

• Consistent above-plan execution and guidance raised in two straight quarters sustain the market's confidence in the business
• The off-price model is perceived as defensive against tariff uncertainty, which pushes more quality merchandise supply toward TJX
• The track record of high return on capital and sustained buybacks generate a quality premium in the multiple the market pays

No clear source of discount is identified from either missing buyers or motivated sellers: analyst coverage is broad, there is no one-off corporate event, and there has been no sharp recent drop in the stock. At the disciplined specialty-retail archetype multiple, the current price No margin of safety: at this price capital is preserved, but it is not bought below its value. — this is a quality business that, at today's entry point, offers no margin of safety. There is also a reason to discount the headline figure rather than pay for it: reported trailing-twelve-month earnings include the card litigation gain and the tariff refunds, which the company itself breaks out and which do not recur.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -4%/year (-19% total): the margin of safety protects the downside. The bull (+7%/year, +39% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Buying execution. The entire model depends on buyers getting right what, when and at what price to buy; an error directly hits margin.
• Tariffs and international trade. Much of the merchandise originates in Asia; U.S. tariff policy creates uncertainty over costs.
• Cybersecurity. Attack attempts, including AI-assisted ones, continue to rise.
• Foreign exchange. Operations in Canada, Europe and Australia expose consolidated results to currency movements.
• Inventory shrink. Theft and organized retail crime recurrently affect financial performance.
• Entry multiple. The current market price leaves no margin of safety under this valuation's disciplined assumptions.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 75% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 5% at a multiple/growth of 4.2 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 5% (EBIT/EV) + ROIC 75% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 7% vs our 5%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -6%/yr, bull-scenario ceiling +5%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: cost advantage, efficient scale, intangibles, switching costs → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price implies 7% vs our 5%: coherent, but at the optimistic end of the range.