With a yearly revenue of $422 billion, Wal-Mart (NYSE:WMT) is on top of the Fortune 500 list. Everybody knows about Wal-Mart and millions shop there, yet the company's investors were not very happy with their investments in the last decade or so. In the last 10 years, the company's stock price fluctuated up and down and currently the stock trades for $61.99 per share. This is only 5.25% more than how much it traded for 10 years ago at $59.15.
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In the last 10 years, the company's quarterly EPS grew from 37 cents to 96 cents-- a growth of 160%. Clearly, the changes in the stock price in the last decade do not reflect this growth.
10 years ago, the company's cash and equivalent holdings were worth $2.42 billion. Today the company holds $7.06 billion of cash and equivalents. This is a growth of 192%.
The company's book value has increased greatly in the last decade. In only 10 years, it moved from $35 to $71, more than doubling.
If the company's share price remains almost flat and its organic value keeps increasing, this should translate into lower P/E and lower Price to Book ratios. This is exactly what has been happening. The next chart shows the company's P/E value, which fell by 60% in the last 10 years.
The chart below, presenting the company's historical price to book value, shows a very similar pattern.
In conclusion, Wal-Mart's stock price does not fairly reflect its value. The company has a lot of upside potential. I rate Wal-Mart as buy. This is a company that performs great regardless of the economic conditions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.