TJX Companies (NYSE:TJX) vs. Costco Wholesale (NASDAQ:COST) Financial Analysis

TJX Companies (NYSE:TJX) and Costco Wholesale (NASDAQ:COST) are both large-cap retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, institutional ownership, earnings, valuation, dividends, analyst recommendations and risk.

Profitability

This table compares TJX Companies and Costco Wholesale’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
TJX Companies	8.47%	58.81%	15.26%
Costco Wholesale	2.92%	30.48%	10.52%

Institutional & Insider Ownership

91.1% of TJX Companies shares are held by institutional investors. Comparatively, 68.5% of Costco Wholesale shares are held by institutional investors. 0.1% of TJX Companies shares are held by company insiders. Comparatively, 0.2% of Costco Wholesale shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for TJX Companies and Costco Wholesale, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TJX Companies	0	1	17	0	2.94
Costco Wholesale	0	9	20	0	2.69

TJX Companies currently has a consensus price target of $141.53, suggesting a potential upside of 13.50%. Costco Wholesale has a consensus price target of $1,034.79, suggesting a potential upside of 3.28%. Given TJX Companies’ stronger consensus rating and higher possible upside, equities analysts plainly believe TJX Companies is more favorable than Costco Wholesale.

Dividends

TJX Companies pays an annual dividend of $1.70 per share and has a dividend yield of 1.4%. Costco Wholesale pays an annual dividend of $5.20 per share and has a dividend yield of 0.5%. TJX Companies pays out 40.0% of its earnings in the form of a dividend. Costco Wholesale pays out 29.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. TJX Companies has increased its dividend for 5 consecutive years and Costco Wholesale has increased its dividend for 22 consecutive years.

Earnings & Valuation

This table compares TJX Companies and Costco Wholesale”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TJX Companies	$56.36 billion	2.47	$4.86 billion	$4.25	29.34
Costco Wholesale	$254.45 billion	1.75	$7.37 billion	$17.63	56.83

Costco Wholesale has higher revenue and earnings than TJX Companies. TJX Companies is trading at a lower price-to-earnings ratio than Costco Wholesale, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

TJX Companies has a beta of 0.9, meaning that its share price is 10% less volatile than the S&P 500. Comparatively, Costco Wholesale has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.

Summary

Costco Wholesale beats TJX Companies on 9 of the 17 factors compared between the two stocks.

About TJX Companies

The TJX Companies, Inc., together with its subsidiaries, operates as an off-price apparel and home fashions retailer in the United States, Canada, Europe, and Australia. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International. The company sells family apparel, including footwear and accessories; home fashions, such as home basics, furniture, rugs, lighting products, giftware, soft home products, decorative accessories, tabletop, and cookware, as well as expanded pet, and gourmet food departments; jewelry and accessories; and other merchandise. It offers its products through stores and e-commerce sites. The TJX Companies, Inc. was incorporated in 1962 and is headquartered in Framingham, Massachusetts.

About Costco Wholesale

Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company offers branded and private-label products in a range of merchandise categories. It offers merchandise, such as sundries, dry groceries, candies, coolers, freezers, deli, liquor, and tobacco; appliances, electronics, health and beauty aids, hardware, garden and patio products, sporting goods, tires, toys and seasonal products, office supplies, automotive care products, postages, tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosks, and jewelry; and meat, produce, service deli, and bakery products. The company also operates gasoline, pharmacies, optical, food courts, hearing-aid centers, and tire installation centers; and offers business delivery, travel, grocery, and various other services online. It also operates e-commerce websites. The company was formerly known as Costco Companies, Inc. and changed its name to Costco Wholesale Corporation in August 1999. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.