Walmart stock (WMT) has been on a nice climb since earnings last month. It’s trading near its 52-week high, which is a good sign.
However, it’s important to evaluate this company’s fundamentals before making a purchase. Here are five key factors to consider: Value, Growth, Momentum, Quality, and Earnings Revisions.
1. Strong Dividend Payout Ratio
The dividend payout ratio is a key measure that shows how much profit a company is willing to pay out to shareholders. This is a good way to assess wmlink/2step whether a business has enough room to grow its dividend in the future or if it might be overextended and struggling to maintain earnings growth.
Walmart has paid a quarterly cash dividend since 1974, and it has increased it annually for more than four decades. It recently joined the Dividend Aristocrats, an elite group of companies that have paid and increased their dividends for at least 25 consecutive years.
Its low payout ratio and ample free cash flow should enable it to continue its streak of annual dividend hikes. Shareholders can count on a 46th increase in 2023, as long as earnings trends remain strong.
2. Strong Market Share
Walmart stock is a powerful retail name that has a strong market share in its niche of selling groceries. It competes with other big-box retailers such as Target (TGT), Costco Wholesale Corporation (COST), and Kroger Company, but its grocery selection is more limited than Amazon’s Whole Foods.
Its scale allows it to dominate in ecommerce while retaining large brick-and-mortar stores that customers can visit for additional products. It also has a competitive advantage over smaller competitors as its supply chain network allows it to control costs while delivering an optimized assortment across all channels.
As inflation climbs to near four-decade highs, richer customers pinched by the rising cost of gas and freight are opting for grocery purchases at Walmart, boosting sales. Its recent merchandising enhancements should allow it to gain further market share in this segment.
3. Stable Growth
Walmart stock has been able to ride out the recessions in the past and is a safe choice for investors who want stability. In addition, it has a solid track record of raising its dividends for many years in a row.
The company also has a healthy balance sheet and high credit ratings. This makes it a great candidate for investors who are looking to increase their investments in blue-chip stocks.
Despite the challenges of a slowing economy and the risk of excessive inventory, walmart stock remains a good option for long-term investors who are willing to wait for the market to normalize. As long as its gross profit margins stay above a certain level, the company will be able to grow its sales and dividends.
4. High P/S Ratio
The price to sales ratio, or P/S ratio, is one of several financial ratios that investors use to evaluate a stock’s valuation. It is a key indicator of whether a company is undervalued, overvalued, or priced just right.
The P/S ratio compares a stock’s market capitalization to its total sales volume over a designated period or per share. The lower the ratio, the better.
Investors should look at a company’s P/S ratio when analyzing its valuation, particularly when comparing it to other companies in the same industry. If a company’s P/S ratio is higher than average, it may indicate overvaluation.
Walmart is a global retail giant that operates in 24 different countries and online. It is considered a blue chip stock because of its strong financial performance and ability to remain profitable during economic downturns.
5. High Inventory Levels
Walmart, Target, Gap and other big-box retailers are facing a glut of extra merchandise that has piled up in store backrooms and warehouses. While executives say they’re working to clear inventoryby Ideal News Tech, it may take several quarters to get through the build-up.
One way Walmart is addressing the issue is by slashing prices on overstocked goods. It also plans to invest in supply chain software.
In the second quarter, Walmart’s sales rose 6.5% from a year earlier and 12% on a two-year basis. This was driven by strong grocery sales and a higher average ticket size.
The company has a long history of building its business through low prices and an efficient operations model. Its EDLP (Everyday Low Prices) philosophy is its most important competitive advantage.
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