WMT Stock Report

2-Year Price History

Ockham’s Rating

WMT Stock Evaluation

Looking at WMT since last week, there has been little movement in price on a percentage basis. Additionally, there haven’t been significant revisions to earnings estimates for WMT. Given this, we are maintaining our Undervalued rating. While there may not have been any meaningful changes in either price or earnings outlook, we still want to analyze where WMT is in relationship to its historical fundamentals. Looking at the ratios and multiples described below and throughout this report is the best way to evaluate the strength of WMT’s current Undervalued rating.

WMT Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company’s stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, WMT the high and low end of the Price to Sales per share ratios are 0.77x and 0.59x respectively.

Notice that WMT’s current Price to Sales per share ratio is 0.44x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $48.63, WMT is 36% below where we would expect to see it. This will beneficially factor into our final analysis of WMT as it is not often that this stock sinks to these levels.

WMT Cash Earnings

Looking at WMT specifically in their Cash Earnings capabilities, Ockham views WMT as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for WMT, the current level of Cash Earnings compared to its historical levels helps identify where WMT is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 15.55 and a historical low Cash Earnings per share ratio of 11.81, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for WMT? From the Ockham perspective, we are looking specifically at WMT to see if the market is recognizing the huge disparity between WMT’s past stock price to Cash Earnings ratio to today’s levels. At a difference of 32% below the average historical Price to Cash Earnings ratio, our view would be quite positive at this point. However, as with all metrics, we need to also take other factors into account when looking at WMT. While we view better Cash Earnings metrics as very important, if the market is slow to identify this value, or if Cash Earnings were to fall from these levels, we would become more neutral in our stance.

WMT Dividends

When determining a company’s future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn’t imperative for WMT to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for WMT is $1.09 producing a current dividend yield of 2.24%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from WMT against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from WMT over previous years was 2.36% while the lowest dividend yield was 0.37%. If you are looking for some “bang for your buck” then a dividend yield of 64.10% above the historical median should be enticing. WMT receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.