Tuesday, March 8, 2011

Is Walmart Finally A Value Play?

[Shares of Walmart have been in the dumps recently as the stock currently trades at $52 per share. The company’s recent earnings announcement was average at best and the stock dropped again. Walmart may not have much growth but the stock is starting to turn into an accidental high yielder.]

[Same store sales growth was down 1.8% this past quarter after declining 1.3% two quarters ago. This makes it seven straight quarters of negative same store sales growth. Next quarter, same-store sales for the first quarter should are projected to be flat to negative 2 percent. Sales in the United States also declined in the quarter, by 0.5 percent to $71.1 billion.

International earnings are solid with sales increasing 8.9 percent to $31.4 billion for the quarter. This would help to replace the lower domestic growth. Walmart had total revenues of $5.02 billion. Earnings per share came in at $1.41 a share. Both numbers are an improvement over last year’s Q4 numbers.  Earnings rose 6.3 percent to $15.4 billion dollars.

Walmart is a cash cow and has no problems earning cash. The company generates $23 billion dollars in free cash flow and has $7 billion dollars in cash. Shares trade at 11 times this year’s earnings and 10.5 times next year’s. The earnings are projected to grow 10% per annum over the next five years. EPS is up 8% over the previous five years. Walmart trades at 2.69 times sales and 0.44 times book value.

The most attractive aspect of Walmart is the dividend yield. Walmart is currently yielding 2.3%, which is close to solid dividend territory.  The current dividend payout could easily be boosted from its 29% payout ratio. If the company increases its dividend and correct’s its lagging domestic sales, Walmart just may become a value play.
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1 comment:

  1. I think you meant

    Walmart trades at 2.69 times book and 0.44 times sales value instead of

    "Walmart trades at 2.69 times sales and 0.44 times book value"

    ReplyDelete

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