It is easy to see how Wal-Mart Stores Inc (NYSE:WMT) became the world's largest retailer when you review its amazingly consistent record of above-average earnings growth. Over the past 15 years alone, Wal-Mart has averaged growing their earnings at 12% per annum, and offers an attractive and growing dividend yield of 2.1%. However, this impeccable record did not go unnoticed as the market typically applied a premium valuation relative to their earnings justified intrinsic value. However, earnings and price finally converged, as they inevitably would, by 2006, and price has closely tracked earnings since.
This article is intended to look at Wal-Mart's "essential fundamentals at a glance" through the lens of the F.A.S.T. Graphs™ research tool. Therefore, rather than reinvent the wheel, we direct the readers to the article "Wal-Mart For The Long Term: It's Not Overvalued Yet" by Intangible Valuation.
A Live F.A.S.T. Graphs™ on Wal-Mart
The F.A.S.T. Graphs™ on Wal-Mart illustrates this blue chip company can be purchased at a sound valuation. Therefore, we rate Wal-Mart a buy based on the following fundamental metrics:
- a PE ratio of 15.7, among its lowest since 1999 versus its normal PE range 21-24
- a price to sales ratio of .55, one of its lowest since 1999
- a current dividend yield of 2.1%, 4 times its 1999 yield
- a payout ratio of approx. 30% indicating room for future dividend growth
Moreover, in order to conduct your own research and get a clearer perspective on Wal-Mart's valuation, click on the picture above that links you to a fully functioning sample F.A.S.T. Graphs™ on Wal-Mart and research this high-quality dividend growth stock deeper and faster.
Click on this link or the picture above that will take you to a free, live, and fully functioning FAST Graphs™ on Wal-Mart. Run this "tool to think with" through its paces. Use the tan navigation bar to the left of the graphs and draw multiple graphs ranging from 2 to 20 years of history. Discover how this tool instantly provides a clear picture of the business behind the stock and dynamically re-evaluates valuation and reveals the clear correlation between the company's earnings and price. Note: This link will be live for 90 days beginning October 12, 2012. For more advanced instructions on how to utilize the live graph, follow this link.
Summary and Conclusions
Wal-Mart is our dividend growth stock value idea of the week. At its current quotation, Wal-Mart is trading at what appears to be a sound valuation. Additionally, the opportunity for long-term dividend growth appears well-defined. Consequently, we believe this is an attractive candidate worthy of further due diligence.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.