1) Compute the ratios in the exhibit on page 3 for Target and Walmart for 2010. The financial statements can be found in the annual report - visit each company's website, then go to investor relations to access the online report. For both companies, assume that all sales are credit sales. Compare the ratios of Target and Walmart. Which company do you think is doing a better job in managing the following? Explain your answers.
- Net income or loss
- Financing with debt or equity
- Investing in assets
- Rewarding its stockholders
2) Compute Target's ROE for the year ending January 29, 2011, including the elements of net income/sales, sales/average total assets, and average total assets/average stockholders' equity. What does this analysis tell you about how Target generates its ROE?
3) What are Target's dividends per share and dividend payout ratio for the last two years? Why do you think Target pays a dividend? How do you think Target determines the amount of dividend they will pay?
4) Given Target's stock price was $50 per share at the end of January 2011, what was Target's PE ratio as of that date? If the average PE for companies is 15, what does this tell you the market is saying about Target's future?
5) Research Target for any important issues including ethical issues which it may have had to deal with in the last three years - evaluate the company's response to these issues.
6) Looking back over your answers to questions 1 - 5, how do you think Target is performing? What is the short term (one year) and long run (five+ year) financial outlook Target? Would you buy the stock of Target? If so, why? If not, why not? On the other hand, if you were a commercial banker, would you lend money to this company? Support your conclusions with a summary of your research and analysis.
7) Do you have any ideas of how to improve Target's performance and its value?