Target Financial Analysis

1273 Words May 1st, 2012 6 Pages
Table of contents

Introduction TARGET Corp ROIC vs. WACC Target Corp vs. Industry ROIC target Corp vs. Industry Revenue Trend Target Corp Operating Expense vs. Industry operating expense as a percent of revenue Target corp Operating Profit vs industry operating profit as a percent of revenue. target Corp Economic Moat Conclusion Works Cited

Table of figures Figure 1 Target Corp ROIC vs WACC; Source: Mergent Online; Annual Studies. Figure 2 Target Corp vs. Industry ROIC; Source: Mergent Online; Annual Studies Figure 3 Huntsman Corp. Huntsman, Eastman, Industry Revenue Trend ; Source: Mergent Online; Annual Studies Figure 4: Huntsman Corp. Operating Expense as Percent of Revenue; Source: Mergent
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invested in target surged and created value for all stakeholders from 2005-2008. From 2005-2007, Target was able to effectively use the money it borrowed from investors and creditor to create value for the organization. This occurred because of a surge in economic activity from 2005-2007 (United States Department of Labor, 2011). Why did the ROIC take a down turn? What was the cause? According to the Wall Street Journal, Target Corp.’s credit-card portfolio hurt its performance in the recession, as delinquencies and defaults soared. The economic recession that began in 2007 was the main catalyst behind Targets decrease in ROIC. The company’s ROIC decreased through much of the recession. Target is able to maintain a surplus over the cost of capital from 2005-2009. The Weighted average cost of capital was almost parallel form 2005-2009.

Company vs. Industry ROIC
The comparison between Target Corp and the industry Return on Invested Capital (ROIC) is to examine if both the industry as well as Target’s returns are consistent with each other. Target is located under NAICS code 452990, which entails All Other General Merchandise Stores. The ROIC is how effectively a company uses the money borrowed or owned invested in its operations (Carpenter, 2009). As stated earlier, ROIC is calculated by dividing current operating profits by liabilities and equity from the previous year. Figure 2 provides a detailed interpretation on Target’s ROIC and the industry ROIC. As
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