Should you take up more of T.J. Maxx (NYSE:TJX) based on current volatility?

T.J. Maxx is generating 0.0283% of daily returns assuming volatility of 2.3276% on return distribution over 90 days investment horizon. As many adventurous traders are excited about consumer cyclical space, it is only fair to break down the risk of shorting TJX Companies based on its current volatility spike. We are going to inspect if the current expected returns justify T.J. Maxx's volatility.
Published over a year ago
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Reviewed by Raphi Shpitalnik

TJX Companies has roughly 4.29 B in cash with 756.82 M of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 3.58.
Volatility is a rate at which the price of T.J. Maxx or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of T.J. Maxx may increase or decrease. In other words, similar to T.J.'s beta indicator, it measures the risk of T.J. Maxx and helps estimate the fluctuations that may happen in a short period of time. So if prices of T.J. Maxx fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is T.J. Maxx's Liquidity

T.J. Maxx financial leverage refers to using borrowed capital as a funding source to finance The TJX Companies ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. T.J. Maxx financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to T.J. Maxx's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of T.J. Maxx's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between T.J. Maxx's total debt and its cash.

T.J. Maxx Gross Profit

T.J. Maxx Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing T.J. Maxx previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show T.J. Maxx Gross Profit growth over the last 10 years. Please check T.J. Maxx's gross profit and other fundamental indicators for more details.

T.J. Maxx Volatility Drivers

T.J. Maxx unsystematic risk is unique to TJX Companies and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in T.J. Maxx you can also buy Macys Inc. You can also mitigate this risk by investing in the consumer discretionary sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing T.J. Maxx important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in T.J. Maxx income statement and balance sheet. Here are more details about T.J. volatility.
0.891.00.90.93-0.440.46-0.640.870.820.57-0.7-0.570.73-0.6-0.41-0.50.02
0.890.910.750.9-0.540.14-0.640.710.680.53-0.54-0.520.56-0.45-0.28-0.34-0.1
1.00.910.870.93-0.480.41-0.630.820.770.51-0.73-0.580.72-0.55-0.36-0.480.01
0.90.750.870.84-0.330.56-0.60.890.850.67-0.59-0.470.61-0.58-0.42-0.42-0.02
0.930.90.930.84-0.410.33-0.790.880.860.72-0.49-0.610.61-0.57-0.39-0.36-0.19
-0.44-0.54-0.48-0.33-0.41-0.110.2-0.25-0.22-0.110.430.14-0.390.190.040.33-0.08
0.460.140.410.560.33-0.11-0.050.640.620.46-0.230.080.63-0.54-0.38-0.690.44
-0.64-0.64-0.63-0.6-0.790.2-0.05-0.68-0.72-0.70.30.67-0.220.560.5-0.050.59
0.870.710.820.890.88-0.250.64-0.680.990.88-0.33-0.470.68-0.72-0.57-0.50.02
0.820.680.770.850.86-0.220.62-0.720.990.92-0.25-0.450.63-0.73-0.59-0.46-0.04
0.570.530.510.670.72-0.110.46-0.70.880.920.09-0.320.4-0.66-0.56-0.29-0.15
-0.7-0.54-0.73-0.59-0.490.43-0.230.3-0.33-0.250.090.47-0.50.30.180.3-0.05
-0.57-0.52-0.58-0.47-0.610.140.080.67-0.47-0.45-0.320.47-0.260.40.51-0.140.24
0.730.560.720.610.61-0.390.63-0.220.680.630.4-0.5-0.26-0.76-0.56-0.920.6
-0.6-0.45-0.55-0.58-0.570.19-0.540.56-0.72-0.73-0.660.30.4-0.760.930.64-0.26
-0.41-0.28-0.36-0.42-0.390.04-0.380.5-0.57-0.59-0.560.180.51-0.560.930.4-0.24
-0.5-0.34-0.48-0.42-0.360.33-0.69-0.05-0.5-0.46-0.290.3-0.14-0.920.640.4-0.73
0.02-0.10.01-0.02-0.19-0.080.440.590.02-0.04-0.15-0.050.240.6-0.26-0.24-0.73
Click cells to compare fundamentals

Scrutinizing T.J. Maxx - a closer look

The current indifference towards the small price fluctuations of T.J. Maxx created some momentum for investors as it was traded today as low as 52.24 and as high as 54.81 per share. The company directors and management did not add any value to TJX Companies investors in July. However, most investors can still diversify their portfolios with T.J. Maxx to hedge their inherited risk against high-volatility market scenarios. The stock standard deviation of daily returns for 30 days investing horizon is currently 2.33. The current volatility is consistent with the ongoing market swings in July 2020 as well as with TJX Companies unsystematic, company-specific events.
 2010 2014 2020 (projected)
Long Term Debt to Equity0.30.380.41
Interest Coverage107.8440.48279.31

Will T.J. Maxx continue to go out of control?

Current value at risk is at -3.23. TJX Companies has relatively low volatility with skewness of 0.61 and kurtosis of 0.07. However, we advise all investors to independently investigate TJX Companies to ensure all accessible information is consistent with the expectations about its upside potential and future expected returns.

Our Final Take On T.J. Maxx

When is the right time to buy or sell TJX Companies? Buying stocks such as T.J. Maxx isn't very hard. However, what challenging for most investors is doing it at the right time. Proper market timing is something most people cannot do without sophisticated tools, which help to isolate the right opportunities, deliver winning trades and diversify portfolios on a daily bases. The bottom line, as of the 19th of August 2020, our final 30 days buy-hold-sell recommendation on the company is Strong Hold. We believe T.J. Maxx is undervalued with low odds of financial turmoil for the next two years.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of The TJX Companies. Please refer to our Terms of Use for any information regarding our disclosure principles.

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