Is TJX Stock Overvalued After a 150% Five-Year Rally?

The TJX Companies (TJX) have delivered a remarkable 150% total return over the past five years, driven by consistent earnings growth, disciplined capital allocation, and strategic international expansion. However, as the stock trades at a trailing P/E of 34.13 and a forward P/E of 30.12, skepticism about its valuation is warranted. This analysis evaluates whether the current price of $145.58 reflects realistic earnings potential or speculative overreach, using discounted cash flow (DCF) modeling, valuation metrics, and strategic growth plans.

Financial Performance and Guidance: A Foundation of Strength

TJX's recent results underscore its operational resilience. For fiscal 2026 (FY26), the company raised guidance, projecting 4% consolidated comparable sales growth and a pretax profit margin of 11.6%. Q3 FY26 results were particularly robust, with net sales of $15.1 billion (up 7% year-over-year) and a 12.7% pretax margin. Earnings per share (EPS) for FY26 are expected to reach $4.63–$4.66, a 9% increase from FY25. These figures suggest a business that is not only maintaining its margins but also outperforming expectations in a challenging retail environment.

The company's capital return program further strengthens its appeal. In FY25, TJX returned $4.1 billion to shareholders through buybacks and dividends, and in Q3 FY26, it returned $1.1 billion. This disciplined approach to shareholder value creation aligns with its long-term strategy of balancing reinvestment in growth with returns to investors.

Valuation Metrics: High Multiples, But Justified?

TJX's trailing P/E of 34.13 and forward P/E of 30.12 appear elevated compared to the S&P 500's average P/E of ~25. However, these multiples must be contextualized against the company's growth trajectory. The forward P/E of 30.12 implies that investors are paying $30.12 for every $1 of expected earnings in FY26. If the company delivers on its guidance of $4.65 (midpoint of $4.63–$4.66), the intrinsic value based on forward earnings would be approximately $140. This suggests the current price of $145.58 is only marginally above the earnings-based valuation, assuming no additional growth beyond FY26.

A deeper dive into DCF analysis provides further clarity. Using a weighted average cost of capital (WACC) of 7.33%, derived from Alpha Spread's CAPM-based calculation, and assuming a 4% long-term growth rate for free cash flow (aligned with TJX's guidance), the intrinsic value estimate exceeds the current stock price. For instance, if TJX's unlevered free cash flow is projected to grow at 4% annually for the next five years and then stabilize at 2%, the DCF model yields an intrinsic value of approximately $155–$160. This implies the stock is not overvalued but rather fairly priced for its growth prospects.

Strategic Expansion: A Catalyst for Long-Term Value
TJX's aggressive international expansion plans are a critical component of its value proposition. The company aims to open 2,000 new stores globally by 2030, including 100 in Spain, and expand its total store count to 7,000. This growth is underpinned by its off-price retail model, which leverages global sourcing from 100+ countries and a digital footprint spanning six e-commerce platforms. Strategic partnerships, such as the joint venture with Grupo Axo in Mexico and a minority stake in Brands for Less in the Middle East further diversify its revenue streams.

While these initiatives require upfront capital expenditures, they are expected to drive incremental sales and margin expansion. For example, TJX's Q3 FY26 results demonstrated that new store openings in Canada and international markets contributed to a 5% consolidated comparable sales increase. If the company maintains this momentum, the long-term growth assumptions in the DCF model become more defensible.

Risks and Market Sentiment
Despite its strengths, TJX faces headwinds. Rising operating costs, inventory shrink, and macroeconomic volatility could pressure margins. Additionally, the stock's short interest of 1.25% suggests limited bearish sentiment, but it also indicates that the market is not overly bearish. Analysts remain cautiously optimistic, with Wall Street's 3.4% sales growth expectation for FY26 slightly exceeding TJX's 2%–3% guidance. This gap highlights the need for the company to exceed expectations to justify its premium valuation.

Conclusion: A Justified Premium, Not a Speculative Bet

TJX's valuation appears to reflect a balance of current earnings strength and future growth potential. While the P/E multiples are elevated, they are supported by robust earnings growth, a disciplined capital structure, and a clear path to international expansion. The DCF model, using conservative assumptions, suggests an intrinsic value above the current stock price, indicating that the market is not overpaying for TJX's prospects. For investors, the key risk lies in the company's ability to execute its expansion plans and maintain margin discipline in a volatile environment. If successful, TJX's valuation premium is not speculative but a rational reflection of its durable competitive advantages and growth trajectory.