Wmt Valuation
Summary - Valuing Wal-Mart
In utilizing the fundamental data provided by the 2010 Richard Ivey School of Business Foundation article titled Valuing Wal-Mart - 2010, I have made the following conclusions regarding the value of Wal-Mart (WMT) stock as of February 2012. * Utilizing the constant growth dividend discount model (DDM), the value of Wal-Mart’s stock price is $60.20. The most recent closing price of Wal-Mart stock was $53.48. Given this information, the constant growth DDM valuation suggests that the Wal-Mart stock is currently undervalued. * Utilizing the two-stage DDM approach, the value of Wal-Mart’s stock price is $83.95. Similar to the constant growth DDM valuation conclusion, the Wal-Mart stock is currently undervalued. * The capital asset pricing model (CAPM) was used to determine the appropriate required rate of return on Walm-Mart’s stock. The required rate of return for Wal-Mart is 7.01% * In following the concepts of the price/earnings (P/E) multiple approach, Wal-Mart’s intrinsic value based upon the P/E multiple approach is $55.03. Given the current stock price of Wal-mart of $53.48, this valuation would support that Wal-Mart’s stock is undervalued.
*Several assumptions were made within the various valuation methods. The assumptions are noted and defined within each of the following sections.
In summary, in employing the dividend discount valuation methods and price/earnings multiple approach, the Wal-Mart stock would be a “buy” given the current close price of $53.48. Wal-mart is the largest retailer in the world with more than $400 billion in annual revenues across more than 8,000 stores. Since the firm’s inception in 1974, the firm has consistently grown their sales, earnings, dividends, and dividend payout ratio. Although the DDM valuations incorporate general assumptions around the dividend growth rates, I believe the assumptions used in the DDM valuation methods are in-line with Wal-Mart’s peers and its
In utilizing the fundamental data provided by the 2010 Richard Ivey School of Business Foundation article titled Valuing Wal-Mart - 2010, I have made the following conclusions regarding the value of Wal-Mart (WMT) stock as of February 2012. * Utilizing the constant growth dividend discount model (DDM), the value of Wal-Mart’s stock price is $60.20. The most recent closing price of Wal-Mart stock was $53.48. Given this information, the constant growth DDM valuation suggests that the Wal-Mart stock is currently undervalued. * Utilizing the two-stage DDM approach, the value of Wal-Mart’s stock price is $83.95. Similar to the constant growth DDM valuation conclusion, the Wal-Mart stock is currently undervalued. * The capital asset pricing model (CAPM) was used to determine the appropriate required rate of return on Walm-Mart’s stock. The required rate of return for Wal-Mart is 7.01% * In following the concepts of the price/earnings (P/E) multiple approach, Wal-Mart’s intrinsic value based upon the P/E multiple approach is $55.03. Given the current stock price of Wal-mart of $53.48, this valuation would support that Wal-Mart’s stock is undervalued.
*Several assumptions were made within the various valuation methods. The assumptions are noted and defined within each of the following sections.
In summary, in employing the dividend discount valuation methods and price/earnings multiple approach, the Wal-Mart stock would be a “buy” given the current close price of $53.48. Wal-mart is the largest retailer in the world with more than $400 billion in annual revenues across more than 8,000 stores. Since the firm’s inception in 1974, the firm has consistently grown their sales, earnings, dividends, and dividend payout ratio. Although the DDM valuations incorporate general assumptions around the dividend growth rates, I believe the assumptions used in the DDM valuation methods are in-line with Wal-Mart’s peers and its