Target Corporation (TGT): Should Investors Hold Onto The Stock?

Its stock has returned more than 60% to its investors since July 2011. It’s currently following an upward trend. Its trailing P/E ratio of 15.5 and forward P/E ratio of approximately 13.3 are lower than the industry average, with the next five years EPS growth forecast of 9.6%. Therefore the stock has enough upside potential to give its investors considerable returns in the long term.

Costco Wholesale Corporation (NASDAQ:COST), founded in 1983, is the fifth-largest retailer and the largest membership warehouse-club chain in the US. In February, the company reported that its revenue rose 8% to reach $24.3 billion. Diluted EPS increased from $0.90 per share last year to $1.24 per share this year.

Costco Wholesale Corporation (NASDAQ:COST) is similarly expanding, and has plans to open 14 more warehouse stores before September. This includes the company’s expansion into international markets such as Japan, South Korea, Taiwan and Australia.

The stock has achieved higher highs and higher lows since March 2009. This suggests that it has been following an upward trend and has given a return of around 60% since then. It is trading with a P/E ratio of approximately 23.6, which is higher than the industry average, with a five-year EPS growth forecast of 10.7%. Therefore, investors might wait for some correction in the stock price before investing in it for long term.

Target Corporation (NYSE:TGT) has announced it will buyback $5 billion of its shares under a stock repurchase program in the next two years. Dividends have been increasing over the past five years and are expected to continue growing. This will ensure that investors get sufficient returns.

The company’s strong fundamental performance has helped it to keep expanding its operations. Its expansion into Canada is now very critical for the company’s future growth, and it’s highly probable that the company will pass this litmus test.

The stock is currently trading at a trailing 12-month P/E ratio of 15, which is lower than not only its major competitors but also than the industry average. Its forward P/E ratio is even lower. With an expected operating income growth of 21.8% and an expected EPS growth rate of 9.1% over the next five years, the stock price currently might not reflect the company’s future growth prospects. Investors might want to hold onto the stock until the price starts reflecting growing sales due to the Canadian expansion.

The article Hold Your Target originally appeared on Fool.com and is written by Shas Dey.

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