Apr 22, 2021
[1 min Read]
The Long-term vs The Short-term:
Walmart's shares are a very interesting stock to invest in on the long-term aspect rather than the short-term as they are generally over-valued as shown by the attached DDM and will relatively be stable as we believe the company is starting to reach a certain growth maturity as its theorical transition years ended on 2019/2020 with the company presenting its online shop and making up to $22 Billion in operating income from it (compared to $20 Billion as of last fiscal year). Hence, the 100% price share growth as witnessed between 2017-2020 will not be seen again as the company's growth and expansion opportunities have reached the top with Covid crisis booming the online and offline retail and consummers good industry, drop-shipping opportunities getting narrowed as AIs are bringing down the margins which will certainly impact the company's revenues.
However, the company's balance sheet and cashflow statement shows that the company has enough cash resources ($14 Billion) to continuously increase its dividends and maintain them at a stable growth rate (2% to 10% in parallel with earnings), moreover, the current management who has been the same for the past two decades will continue on the same path of focusing its earnings on dividend payout (between 45% to 90% depending on the company's yearly EPS). In consequence, one might consider Walmart as an almost risk free asset with some decent returns that will probably last as such for the coming 20 to 30 years.
To sum-up, if you are a day trader and looking to maximize your stock returns, I would say that Walmart is not the place to be (overvalued), opposingly, if you are someone looking for investment opportunities on really low-risk assets with some considerable returns while being ready to hold the stock for at least 60 weeks, Walmart would be a good fit for your Portfolio.