By Eirik Nordgaard
Wal-Mart (NYSE:WMT) is set to report its fourth quarter financial results before the bell on Thursday (2/17). Wal-Mart is the biggest retailer in the world and has recently announced that it will close its smallest Wal-Mart Express stores, plans to operate its own gas stations, and will launch a new mobile payment system. On Thursday, we might see Wal-Mart post its first ever year-over-year decline in revenue in 25 years. Analysts and investors are expecting that increased competition from Amazon (NASDAQ:AMZN), smaller grocers and discount stores will decrease Wal-Mart's dominance. Wall Street is anticipating Wal-Mart to announce earnings of $1.43 per share and revenue of $130.76 billion for the quarter.
We populated the SprinkleBit analyzer with Wal-Mart's main competitors in the discount retail store industry to project how its financial fundamentals compare to its peers. Let's take a look at how Wal-Mart compares against Costco (NASDAQ:COST), Sears (NASDAQ:SHLD), Target (NYSE:TGT), and PriceSmart (NASDAQ:PSMT). For this analysis, we used EBITDA multiples, revenue multiples, market cap to revenue and PE in order to see how Wal-Mart measures up against its peers. By running the fundamental measures in comparison to the companies mentioned, we received an implied share price of $78.66. With the current trading price of $66.12 (EOD 2/17) Wal-Mart is undervalued by 18.96%.
We also analyzed the technicals on the daily chart in order to see where the stock price could potentially move to on the release of earnings. With an entry price of $66.11 and a reported loss on earnings, the stock has the potential to fall to $64.80 for a 1.98% loss. With an entry price of $66.11 and a reported beat on earnings, the stock has the potential to rise to $68 for a 2.86% gain. The risk/reward ratio for this trade is 1.44.