NEW YORK (TheStreet) -- The leftovers have been eaten, the stores have been scoured for sales bargains and the Christmas decorations have been dusted off and hung. As we enter the final stretch of 2013, which of the penny-pinching retailers are the best bet for a happy new year and many returns?
1. Target (TGT)
"We rate Target Corp (TGT) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had subpar growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TGT's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- Target Corp's earnings per share declined by 43.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, Target Corp increased its bottom line by earning $4.53 a share vs. $4.29 a share in the prior year. For the next year, the market is expecting a contraction of 20% in earnings ($3.63 vs. $4.53).
- In its most recent trading session, TGT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Multiline Retail industry and the overall market on the basis of return on equity, Target Corp has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: TGT Ratings Report