Wal-Mart ($WMT) is set to report its fourth quarter financial results before the bell on Thursday (2/17). Wal-Mart ($WMT) is the biggest retailer in the world and has recently announced that they will close is smallest Wal-Mart Express stores, plans to operate its own gas stations, and will launch a new mobile payment system. On Thursday we might see Wal-Mart ($WMT) post its first ever year-over-year decline in revenue in 25 years. Analysts and investors are expecting that increased competition form Amazon ($AMZN), smaller grocers and discount stores will decrease Wal-Mart’s dominance ($WMT). Wall Street is anticipating Wal-Mart ($WMT) to announce earnings of $ 1.43 per share and revenue of $ 130.76 Billion for the quarter.
Fundamental Analysis
We populated the SprinkleBit analyzer with Wal-Mart’s ($WMT) main competitors in the discount retail store industry to project how its financial fundamentals compare to its peers. Lets take a look at how Wal-Mart ($WMT) compare against Costco ($COST), Sears ($SHLD), Target ($TGT), and Price Smart ($PSMT). For this analysis we used EBITDA multiplies, revenue multiples, market cap to revenue and PE in order to see how Wal-Mart ($WMT) measures up against it peers. By running the fundamental measures in comparison to the companies mentioned, we received an implied share price of $ 78.66. With the current trading price of $ 66.12 (EOD 2/17) Wal-Mart ($WMT) is undervalued with 18.96%.
Technical Analysis
We also analyzed the technicals on the daily chart in order to see where the stock price could potentially move to on the release of earnings. With an entry price of $66.11 and a reported loss on earnings, the stock has the potential to fall to $ 64.80 for a 1.98% loss. With an entry price of $66.11 and a reported beat on earnings, the stock has the potential to rise to $ 68 for a 2.86% gain. The risk/reward ratio for this trade is 1.44.
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