The Equity Analysis On Wal Mart Stores Inc.

1039 Words5 Pages
This paper will evaluate two equity analysis reports on Wal-Mart Stores Inc d.b.a. Walmart. Walmart is an American multinational retail corporation that operates chains of discount department stores and warehouse stores. It is the world’s largest company by revenue (according to 2014 Fortune 500 list) with being the biggest private employer in the world with over two million employees. 1. The feature I appreciated about BMO’s analyst report is that it was very clear in stating its argument and the purpose of the report. The organization of the report was effective as it was straightforward to follow and comprehend. The analysis and the supporting facts were skilfully congregated. The thought process of the analyst was accurately conveyed…show more content…
The positive aspect of the report is that it did not suffer from prolixity. The analyst stated his point of view and supported it with several concise statements. In my opinion, the report aimed to avoid fillers, logorrhoea, and redundant information. 2. The main argument by BMO analyst (after the quarterly update) was that Walmart stocks will underperform the market (He lowered the rating to Underperform from Market Perform). This means that the stock is expected to do slightly worse than the market return (S&P 500). The analyst arrived at this conclusion because his 2015 EPS estimate (i.e., lowering from $5.35 to $5.20) led him to a valuation of $78 per share compared with the stock’s closing price of $83 per share. His rating reflects the fundamental view that: • While U.S. 3Q14 comp-store sales growth of 0.5% was slightly positive event when compared with flat expectations, it came at the expense of EBIT margin (7.04% vs. 73.37% LY) as Walmart management made price investments and added labour hours to improve customer service. • The analyst strongly feels that the management is struggling to find the perfect combination of price investments and store associate hours to deliver on its EDLP (everyday low pricing) price promise and improve the customer experience, but cost leverage will take a back seat to sales growth. • Additionally, some of the other reasons cited from lower rating are that 3Q14 grocery sales (56% of
Open Document