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Wal-Mart Stores 2012 2Q financial analysis

Wal-Mart 2Q results are positive. Revenue and generated profit has increased compared to previous year. Revenue increased by +4,5% Net Income before depreciation by +7,6%.

Main sales comes from US which increased by 3,8% Bigest growth comes from Walmart International increased by 6,4%  In general companies results are positive.

While companies results shows good results balance sheet is quite different. Equity level is floating around 35% which is acceptable level for retailer but ~50% would be comfortable. Another thing is liquidity ratio below 1, which has dropped to 0,82 at Q2, this is a bit woring. Altough this is a way to maximise profit by using long pyment defer as a way to finance woring capital, but this is not good for long term companies stability. Altoug this ratio below 1 is normal to all supermarkets as this is they key thing in their business that large deffer payment from your suppliers that will fund your expatiation while your costumers pay you instantly that way funding your inventory storage. Inventory turnover is 32 days, account payables 38 both in line. This differences makes to ~10 bn.$ in working capital surplus which fund companies long term asset like competitors chain acquisition ect.

Low equity level allows to have good return on asset. Its around 20-25% at first 3 quarters and around 30% at Q4 with sale season time. Companies paid 1,4 bn.$/Q in dividends and spend 1,6 bn.$ in share repurchase which is ~1/2 of total companies earnings which is very normal level. Other 1/2 is left in the company for further expantion.  In general companies balance sheet can be treated as a bit risky.

Share value:

Equity / share 70,3 bn.$  3,384 bn. 20,8 $/sh.
Market value 73,8 $ +53,0$ 7,0 years
Year Net income before Depreciation 25,2 bn.$ +7,4$/sh. 10,0%

Companies share basic value has decreased to ~20,8$ (Δ+2%/20,4$ compared with Q1). Current market price is ~74$  (Δ+17,5%/63$) which shows that market is paying 53$ more or 7,2 years (5,8 years) of Net income before Depreciation earnings which is 25,2 bn.$ (24,7 bn.$). Companies shares market evaluation has worsened due to increase of share value, but still remains reasonable. Share profitability (Share market price/Net income before Depreciation) is 10,0% (11,6%) which is remains quite good, but decreased.

Company pays 0,3975$/share/quarter dividend or ~2,2% (2,5%) dividend yield which is average, with dividend payout ratio ~22% which is also a good level. Company has increased its dividend payment by 9+% compared to last year. Companies cash flow management can be considered as well balanced. In general share evaluation and profitability remains reasonable for long term investments, but figures has decreased due to 17% increased share value, also taking into comsideration a bit risky balance sheet.

Analysis source: Walmart 2012 2Q financial results

Previous analysis: Walmart 2012 1Q financial analysis

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