Target's financial valuation was analyzed using comparable companies, pro forma financial statements, sensitivity analysis, and discounted cash flow modeling. The analysis found Target's intrinsic value to be $177.60 per share, significantly higher than its current stock price of $59.13, indicating it is undervalued. Sensitivity analysis showed the valuation is most sensitive to changes in WACC and long term growth rate. The recommendation is that Target focuses on expanding its online market and global business to better realize its intrinsic value.

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TARGET
Financial Valuation

2. Overview
Background
Comparables
Pro Formas
Sensitivity Analysis
Conclusion & Recommendation

3. Background
Started as Dayton Dry Goods: 1902
First Target store 1962
“Tar-Zhay”
Target.direct
366,000 Worldwide Team Members

4. Massive Data Breach

5. CEO Tenure
(Source: Wall Street Journal)

6. Comparables
Market
Cap P/E P/S EPS
Net
Income
Share
Price
Target
(TGT) 37.44B 19.26 0.51 4.52 1.14B $62.79
Walmart
(WMT) 255.75B 16.1 0.53 4.88 15.88B $79.20
Amazon
(AMZN) 134.48B 488.68 1.7 0.64 300.00M $292.24
Dollar
General
(DG) 17.80B 17.9 1.1 3.17 1.03B $56.75
Industry 28.54M 17.3 0.06 3.17 6.36B $50.29

7. Comparables
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
2010 2011 2012 2013
Target $55.77 $48.53 $57.35 $62.79
Walmart $54.07 $59.76 $68.23 $78.69
Amazon $180.00 $173.10 $250.87 $398.79
Dollar General $30.67 $41.14 $44.01 $60.32
Share Prices 2010-2013
2010 2011 2012 2013
TGT 3.3 4 4.28 4.52
WMT 3.71 4.47 4.54 5.02
AMZN 1.37 2.53 -0.09 0.59
DG 1.04 1.82 2.22 2.85
EPS

8. Comparables
AMZN
DG
TGT
(Source: EDGAR Online)

9. Growth Rate & Tax Rate
From To Growth Rate Tax Rate
2013 2014 2.12 % 36.48 %
2014 2015 2.42 % 36.48 %
2015 2016 2.72 % 36.48 %
2016 2017 3.02 % 36.48%
2017 2018 3.32 % 36.48%
Long-Term Growth 3.60 %

10. WACC
Risk-free Interest Rate 3.54 %
Market Return 10.00 %
Market Risk Premium 6.46 %
Beta 0.9
Cost of Equity 9.35 %
Equity 38.83B
Debt 13.78B
Cost of Debt 4.69 %
Tax Rate 36.48 %
WACC 7.68 %

11. Income Statement 2013
Income Statement ($000s) Year: 2013 % Sales
Total Sales (Sale + Credit Sale) 73,301,000 100%
COGS
(Except Depreciation and Amortization) (53,160,000) 72.52%
Gross Profit 20,141,000.00 27.48%
Sale, Marketing and Administrative (14,984,000) 20.44%
EBITDA
5,157,000 7.04%
Depreciation (2,223,000) 3.03%
EBIT
2,934,000 4.00%
Interest Expense (net) (1,126,000) 1.54%
Pretax Income 1,808,000 2.47%
Income Tax (659,558.40) 0.90%
Net Income 1,148,442 1.57%

12. Balance Sheet 2013
Balance Sheet ($000s) Year:2013 % Sales
Assets
Cash and Equivalents 695,000 0.95%
Accounts Receivable - 0.00%
Inventories 8,766,000 11.96%
Other CA
2,112,000 2.88%
Total Current Assets 11,573,000 15.79%
Prop, Plant & Equip 31,378,000 42.81%
Other LT Assets 1,602,000 2.19%
Total Assets 44,553,000 60.78%
Liabilities & Stockholders' Equity
Accounts Payable 11,617,000 15.85%
Other ST or LT Liabilities 2,923,000 3.99%
Debt 13,782,000 18.80%
Total Liabilities 28,322,000 38.64%
Stockholders' Equity 16,231,000 22.14%
Total Liabilities & Equity 44,553,000 60.78%

13. Plug
Year 2013 2014 2015 2016 2017 2018
Total
Assets 44,553,000 45,497,524 46,598,564 47,866,045 49,311,599 50,948,744
Total Liab. & Shares
before Plug 45,592,670 46,610,798 47,792,136 49,147,361 50,688,998
Plug (95,103) (12,234) 73,909 164,238 259,746
After 45,497,567 46,598,564 47,866,045 49,311,599 50,948,744

14. NI and Div in next 5 years
Year 2013 2014 2015 2016 2017 2018
Net
Income 1,453,099 1,492,609 1,538,666 1,591,685 1,652,154 1,720,636
Dividends 741,080 761,231 784,720 811,759 842,599 877,524
Pay out Ratio: 51%

15. FCF & Intrinsic Value
Timeline 0 1 2 3 4 5 6
Year 2013 2014 2015 2016 2017 2018 2019
FCFs 4,901,428 5,123,078 5,367,645 5,637,514 5,935,376 6,149,049
PV of all FCFs $ 125,536,743
Time 0 Cash $ 695,000
Time 0 Debt $ 13,782,000
Intrinsic
Market Cap $ 112,449,743 Bil
Shares
Outstanding $ 633,170 Mil
Intrinsic
Price/Share $ 177.60
Stock Price $ 59.13
% Higher 200%

16. Sensitivity Analysis
273.62
177.59
88.3
54.32
0
50
100
150
200
250
300
0% 5% 10% 15% 20% 25%
Intrinsic price/Share
Rm WACC Intrinsic Price/Share
8% 4.72% 273.62
10% 7.36% 177.59
15% 10.46% 88.3
20% 14.33% 54.32

17. Sensitivity Analysis
LT
Normal
Growth
Intrinsic
P/S
4.80% 248.61
4.40% 219.18
4.00% 196.13
3.60% 177.60
3.20% 162.37
2.80% 149.64
2.40% 138.84
248.61
219.18
196.13
177.60
162.37
149.64
138.84
-
50.00
100.00
150.00
200.00
250.00
300.00
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%
Intrinsic P/S
Intrinsic P/S

18. Sensitivity Analysis
Beta WACC
Intrinsic
Price/Share
1.1 8.64% 139.90
1.0 8.16% 156.78
0.9 7.68% 177.60
0.8 7.21% 203.92
0.7 8.06% 238.27
273.62
177.59
88.30
54.32
0.00
50.00
100.00
150.00
200.00
250.00
300.00
0% 5% 10% 15% 20% 25%
Intrinsic Price/Share
Intrinsic price/Share

19. Sensitivity Analysis
Years
30-year Treasury
yield WACC
Intrinsic
Price/Share
2000 6.23% 7.88% 168.37
2010 4.69% 7.77% 173.54
2014 3.54% 7.68% 177.6

20. Undervalued
Focus on Online Market
Expand Global Business
Conclusion & Recommendations

21. Questions?