On the other hand, the massive and ridiculous over-pricing of Wal-Mart Stores, Inc. (NYSE:WMT)’s stock during the irrational exuberant period 1995 to 1999 went far beyond the market applying a premium valuation. Instead, we see an excellent business that was so irrationally overvalued that in spite of earnings advancing like clockwork year-after-year, Wal-Mart’s stock price had nowhere to go but down.
Perhaps it was the belief in the quality of the company that kept its stock price so elevated for so long. In other words, investors apparently were reticent to sell their positions because of their belief in the strength and quality of the world’s leading retailer.
On the other hand, the enormous headwinds of extreme overvaluation precluded those same investors from making any money over calendar years 2000 to 2007. By utilizing the review feature of F.A.S.T. Graphs™, I learned that Wal-Mart Stores, Inc. (NYSE:WMT)’s operating earnings growth during that timeframe averaged 12% per annum. However, in spite of that stellar growth, shareholders would have lost an average of 4.6% per annum turning an original $10,000 investment into $6876.17. And, even though Wal-Mart raised their dividend every year, it wasn’t able to stem an annualized loss of 3.7% per annum.
Wal-Mart Stores Inc: Fairly Valued And Growing Today
The following earnings and price correlated graph shows that Wal-Mart Stores, Inc. (NYSE:WMT)’s shares have been reasonably priced for the most part since calendar year 2007. I believe what you see in the graph below is the market coming to its senses while simultaneously providing prospective investors the opportunity to own one of the greatest businesses in the world at a very attractive valuation.
When you review Wal-Mart’s performance since it’s been reasonably priced, you see that fair valuation makes all the difference in the world. Instead of losing money, and in spite of the fact that its earnings growth rate has fallen to 9% per annum instead of double-digit growth, long-term Wal-Mart shareholders were rewarded according to the company’s operating achievement as evidenced by the associated performance report below.
Wal-Mart Stores Inc: The Future
Wal-Mart is expected to continue growing over the next five years at approximately the same rate it has over the last seven. The estimated earnings and return calculator below shows that the consensus of 30 analysts reporting to Standard & Poor’s Capital IQ estimate Wal-Mart’s five-year earnings growth rate at 9.2%. Consequently, I believe that Wal-Mart represents the trifecta of above-average growth, above-average yield and sound valuation. Therefore, I believe that Wal-Mart represents the best current opportunity within the Consumer Staples sector today.
Digging Deeper Into Wal-Mart’s Fundamentals
Based on the essential fundamentals at a glance presented by the earnings and price correlated F.A.S.T. Graphs™ plus dividends above, Wal-Mart appears to be a very attractive and sound long-term dividend growth stock. Therefore, I offer the following F.U.N. Graphs (fundamental underlying numbers) in order to take a deeper look into Wal-Mart’s fundamental strengths.
Wal-Mart’s Balance Sheet
A quick graphic glance at Wal-Mart’s balance sheet since 1998 shows continuing strength and improvement. The graph includes the following balance sheet metrics with acronyms:
1). assets per share (atps)
2). cash and equivalents per share (cashps)
3). common equity or book value per share (ceqps)
4). debt long-term per share (dltps)
5). debt per share (dtps)
6). invested capital per share (icaptps)
Wal-Mart’s Cash Flow Statement
A quick graphic glance at Wal-Mart’s cash flow statement since 1998 also shows continuing strength and improvement. The graph includes the following cash flow statement metrics with acronyms:
1). capital expenditures per share (capxps)
2). cash flow per share (cflps)
3). free cash flow per share (fcflps)
4). operating cash flow per share (ocflps)
5). Note: FAST Graphs™ calculates free cash flow (light blue line on the FUN graph) after dividends have been paid.
