TJX COMPANIES INC /DE/ (TJX) stock intrinsic value fair value estimate & owner earnings analysis

TJX runs the world's largest network of off-price apparel and home-fashion stores: TJ Maxx, Marshalls and Sierra in the U.S. ($36.6 billion of fiscal 2026 sales), HomeGoods and Homesense in the U.S. ($10.2 billion), Winners, HomeSense and Marshalls in Canada ($5.6 billion), and TK Maxx and Homesense in Europe plus TK Maxx in Australia ($8.0 billion). It buys brand-name goods opportunistically - vendors' excess production, cancelled orders and closeouts - and sells them below department-store prices. It ended July 2026 with 5,285 stores in ten countries. Owner earnings. We measure the cash the business produces for its owners as operating cash flow, less swings in working capital, less stock-based pay (a real cost), less the capital spending needed to keep the existing stores in shape; spending tied to sales growth is treated as investment, not upkeep. On that basis owner earnings per diluted share were $1.51 in fiscal 2017, $2.40 in fiscal 2020, $0.42 in the 2020 shutdown year (fiscal 2021), $2.87 in fiscal 2022, $2.86 in fiscal 2023, $3.32 in fiscal 2024, $3.55 in fiscal 2025 and $4.38 in fiscal 2026. Every year ties exactly to the reported cash flow statement. Outside the shutdown year they rose every year but one. Normal earning power. Adding back cash interest (about $74 million a year) gives the cash the business generates before its lenders: $3.93 billion in fiscal 2024, $4.12 billion in fiscal 2025 and $4.86 billion in fiscal 2026 after removing a one-time credit card interchange litigation settlement worth about $0.14 per share. Fiscal 2021 (shutdown) and fiscal 2022-2023 (the post-pandemic spike in freight and wage costs) are left out as not representative. We take the middle of the last three years, $4.12 billion, and move it forward by fiscal 2026's underlying net income growth of about 10%, giving a normal level of about $4.52 billion, or roughly $4.05 per share on 1,117 million diluted shares. We moved the level above the three-year middle because six straight quarters (all of fiscal 2026 and the first half of fiscal 2027) have run above it, but did not take fiscal 2026 at face value because part of its jump came from the settlement and from swings in small non-cash items. Owner earnings rose about 18% in fiscal 2026 excluding the settlement; the base case assumes 8% for the coming year, below that pace. The second quarter of fiscal 2027 also included a one-time $331 million refund of previously paid tariffs ($219 million after related costs), which we exclude. What we credit as growth. TJX has added roughly 3% more stores a year for many years, paid for from its own cash in small steps, and kept opening stores through the 2008-09 recession; store count and selling square footage each rose about 3% in fiscal 2026. The company now sees room for 7,500 stores for its existing banners in its current markets, about 2,200 more than today, or roughly twelve to fourteen years of openings at the historical pace. We credit that store growth plus comparable-store sales growth at or below the company's record (comparable sales rose 5% in fiscal 2026 and 5% in the first half of fiscal 2027). We do not credit margin expansion, the newer joint ventures in Mexico and the Middle East, new countries such as Spain (opened March 2026), or the planned step-up to 4% annual store growth, because none of these is yet proven. Share repurchases are not counted as growth: we value the whole business and divide by today's share count. Base case ($115.43 per share). Cash before interest grows 8% next year, 6% a year in years two through five (about 3% from stores and 3% from comparable sales, below the 6.9% a year sales compounded from fiscal 2016 to fiscal 2026 even including the shutdown), 5% in years six and seven, 4% in years eight and nine and 3% in year ten as the remaining store opportunity narrows. After that it grows 2% a year for another decade as comparable sales track the general price level, as they have through TJX's history, and stays flat thereafter. Margins stay at the fiscal 2025-2026 level. The business is worth about $127.6 billion. Bull case ($168.76 per share). The business's own levers execute well: the planned acceleration in store openings arrives and comparable sales stay near their recent 4-6% pace, giving 12% growth next year (below the roughly 18% rise in first-half fiscal 2027 net income excluding the tariff refund), 7.5% a year through year five, 6% in years six to eight, 5% in years nine and ten, 3% for the following decade and 2% thereafter. The business is worth about $187.1 billion. Bear case ($70.42 per share). A severe consumer shock of the kind TJX actually lived through in the 2020 shutdown, when owner earnings fell more than 80% for a year before fully recovering the next. Here it strikes in year three: cash flow drops to a quarter of normal that year and recovers to 85% of normal in year four. On top of that, pre-tax margin falls from fiscal 2026's 12.1% back to fiscal 2020's 10.6% under the tariff, wage and freight pressures the company already lists as risks, cutting the normal level about 12% from the start, and growth slows to 2-3% a year as both store openings and comparable sales slow. After year ten earnings stay flat with no growth. The business is worth about $77.3 billion. Debt and cash. At August 1, 2026 TJX held $6.0 billion of cash against $2.87 billion of notes; $1 billion of 2.25% notes fell due in September 2026. We treat about $2.0 billion of cash as needed to run the business through its seasonal inventory build, leaving about $4.0 billion surplus. The remaining notes carry fixed coupons of 1.15% (due 2028), 3.875% (2030), 1.60% (2031) and 4.50% (2050), well below what new long-term borrowing would cost, which lowers the real burden of the debt by about $0.23 billion to roughly $2.64 billion. Net, shareholders hold about $1.36 billion more cash than debt. Base: business $127.6 billion, net cash $1.4 billion, equity $128.9 billion. Bull: $187.1 billion plus $1.4 billion, $188.5 billion. Bear: $77.3 billion plus $1.4 billion, $78.7 billion. Each is divided by 1,117 million diluted shares. Interest of about $75 million a year is covered many times over even in the bear case's shock year. The larger fixed obligation is the store lease book; its rent is already deducted in owner earnings, so it is not subtracted again, but it is the main reason a shutdown hurts as much as it does. Accounting judgements. The 2020-2022 working-capital swing (suppliers paid late during the shutdown, then caught up) is removed from each year. For fiscal 2022 we measured growth spending against pre-pandemic fiscal 2020 sales rather than the shutdown year, since winning back lost sales is not growth. Non-cash charges such as the $218 million write-off of the investment in Familia, a Russian off-price retailer, in fiscal 2023 and debt-retirement losses in fiscal 2021-2022 are added back as sunk costs. TJX's acquisition intangibles are immaterial, so no adjustment for wasting assets is needed. Margin-of-safety price. We are fairly sure of the earnings level: ten years of owner earnings tie to audited cash flows and, apart from the shutdown, have climbed steadily. The worst plausible event is a long shutdown or a deep recession with stores open but traffic down; the company came through the 2020 version by borrowing and recovered fully within a year, and today it has more cash than debt and nothing material maturing before 2028. The things we are most likely to be wrong about are the margin (tariffs and wages could hold it near 10.6% for good) and the length of the store runway; if both go against us the shares are worth about $70 and still grow slowly from there. The price assumes a four-to-five-year holding period, during which the business pays about a third of its earnings as a rising dividend and uses most of the rest to buy back stock. At $60, normal owner earnings of about $4.05 per share are a 6.7% yield on that price, growing around 6% a year; if the base case unfolds and is recognized within about five years the base case implies roughly a 20% annual return, and if the bear case unfolds instead it implies high single digits a year rather than a loss. That combination is why the margin-of-safety price is $60. Previous estimates were prepared on a different basis and are not comparable. Since then the company reported a strong first half of fiscal 2027, raised its long-term store target from 7,000 to 7,500 and received a one-time tariff refund; only the longer store runway supports our estimate, and the refund is excluded.