Wal-Mart's Bringing In $15,000 Every Second

| About: Wal-Mart Stores, (WMT)

That's about how fast the cash came in last quarter for Wal-Mart Stores (NYSE:WMT) - $15,000 a second. WMT posted solid earnings and demonstrated year over year growth of roughly 6%, but the stock tanked and WMT closed Tuesday at $60.07.

This past year, WMT's share repurchase program slowed down, as more cash was used for expansion and acquisition. Nevertheless, fully diluted share count dropped by 121 million shares - a pace at which WMT would buy back all of its own shares in less time than it takes a 30 year Treasury bond to mature. In the past year, dividends increased by roughly 20%, and the stock now yields 2.3%.

WMT now has annual sales of well over $400 billion per year and has a market cap of less than half its sales. This means that a relatively small increase in prices or decrease in expenses can produce a big increase in per-share earnings. We are still in the shadow of the Great Recession, and WMT's typical customer is not immune to its consequences. WMT's ability to achieve top line growth in this environment is impressive and suggests that, in a more robust recovery, WMT's operating leverage could produce blow out growth in profits.

WMT is by far the largest retailer in the world - the last time I looked it was nearly 3 times as large as its nearest competitor. Much like Microsoft (NASDAQ:MSFT), WMT has had trouble "getting respect" in the market because, in the perception of some analysts and members of the public, it is so large that there is very little that could push its numbers higher in a meaningful way. So it just keeps on growing, buying back shares, increasing its dividend, and maintaining its dominant position in retail.

Until recently, I have had a rule that I would jump in and buy WMT whenever the price per share got below $50. The stock crept up into the low $60s the past few months, and I may not get many more (perhaps not any more) opportunities to buy below $50. I am examining whether I should move the trigger point up to $55, and will probably follow up on this shortly. It is definitely a much bigger company with many fewer shares than the company which I decided was a steal at any price below $50 a share.

Disclosure: I am long WMT, MSFT.