With 20% Gains In A Month Is Target A Better Pick Over FedEx Stock?

Given its better prospects, we think Target stock (NYSE: TGT) is a better choice than FedEx Stock (NYSE:FDX). Although these companies are in different industries, we compare them because they have a similar market capitalization, between $60 billion and $65 billion. The decision to invest often comes down to finding the best stocks within the parameters of certain characteristics that suit an investment style. The size of profits may matter, because larger profits may imply greater market power. In the sections below, we explain why we believe TGT will deliver higher returns than FDX over the next three years. We compare a multitude of factors, such as historical revenue growth, returns and valuation, in an interactive stock analysis dashboard. FedEx vs Target
TGT
: Which stock is a better bet? Parts of the analysis are summarized below.

FDX stock has seen little change, falling slightly from $260 levels in early January 2021 to around $260 now, while TGT stock has faced a notable 25% decline from early $175 levels. January 2021 at around $135 now, up from an increase. by about 20% for the S&P 500 over this period of approximately three years.

Overall, FDX stock’s performance relative to the index has been quite volatile. The stock’s returns were 0% in 2021, -33% in 2022, and 49% in 2023. Likewise, TGT stock’s decline has been far from consistent, with returns of 31% in 2021, -36% in 2022 and -10% in 2023. In comparison, the S&P 500 returns were 27% in 2021, -19% in 2022, and 19% in 2023, indicating that FDX underperformed the S&P in 2021 and 2022 and TGT underperformed the S&P in 2022 and 2023.

Actually, consistently beating the S&P 500 – in good times and bad – has been difficult in recent years for individual stocks; for industrial heavyweights including BA, UNP and GE, and even for megacaps GOOG, TSLA and MSFT. On the other hand, the Trefis High quality walletwith a collection of 30 titles, has has outperformed the S&P 500 every year during the same period. Why is that? As a group, stocks in the HQ portfolio have generated better returns with less risk relative to the benchmark and less roller coaster ride, as evidenced by HQ Portfolio Performance Metrics.

Given the current uncertain macroeconomic environment with high oil prices and high interest rates, could FDX face a similar situation as in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a sharp rise? We expect some growth from both titles over the next three years, but TGT will likely fare better between the two.

1. Target’s revenue growth is better

• Target 12% the average annual growth rate over the past three years is slightly better than ten% for FedEx
  FDX
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• FedEx’s revenue growth was driven by growth in e-commerce, particularly during the COVID-19 pandemic lockdown phase. Solid pricing growth supported revenue growth.
• However, sales growth has slowed in recent quarters due to a weaker consumer spending environment. For perspective, FedEx saw its average daily package volume decline by 10%, 7%, and 11% for its Express, Ground, and Freight segments in 2023 (fiscal year ends in May), respectively.
• Target’s revenues increased from approximately $78 billion in 2019 to approximately $94 billion in 2020, due to the impact of COVID-19, as consumers stocked up on essential products, resulting in Target has an advantage over other retailers during this period. Additionally, sales reached $109 billion in 2022 as demand accelerated further.
• However, demand has slowed in recent quarters due to weakening consumer spending.
• Looking at the last twelve months, Target has seen its sales decline by 1.7%, while FedEx sales fell 6.5%.
• OUR FedEx Revenue Comparison And Comparison of target income Dashboards provide more information about company sales.
• We expect FedEx’s revenue to grow at a slightly faster rate than Target’s over the next three years.

2. FedEx is more profitable

• FedEx’s operating margin increased from 3.3% in 2020 to 5.9% in 2023, while Target’s operating margin increased from 6.0% in 2019 to 3.5% in 2022.
• Additionally, looking at the trailing twelve month period, FedEx’s operating margin of 6.9% the prices are better than 3.5% for Target.
• FedEx’s operating margin decline can be attributed to higher operational costs, primarily fuel, and lower volumes.
• OUR FedEx Operating Income Comparison And Comparison of target operating profit dashboards contain more details.
• Regarding financial risk, FedEx 75% debt as a percentage of equity is greater than 26% for Target, but it’s 8% cash as a percentage of assets is greater than 3% for the latter, implying that Target has a better debt position and FedEx has more liquidity.

3. The network of everything

• We note that Target has demonstrated slightly better revenue growth and has a better debt position. In contrast, FedEx is more profitable and has a better cash cushion.
• Now, looking at the outlook, using P/S as a basis, due to the large fluctuations in P/E and P/EBIT, we think Target is the better choice of the two.
• Even when comparing current valuation multiples to historical averages, Target is better, with its shares currently trading at 0.6x income compared to the average of the last five years of 0.8x. In contrast, FedEx stock trades at 0.7x income aligned with its average over the last five years.
• OUR Comparison of FedEx Valuation Ratios And Comparison of target valuation ratios offers more details.

Even though TGT could outperform FDX over the next three years, it’s worth seeing how FedEx Peers pricing on metrics that matter. Further valuable comparisons for companies in all industries can be found at Peer comparisons.

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