Wmt Valuation Essay - 1915 Words

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†¦show more content†¦Through the mid-part of the 80’s and into the early 90’s Wal-Mart had still produced annual earnings growth over 20%. It wasn’t until the early part of the century where Wal-Mart had produced earnings growth in the low teens to single digits. With that as supporting material, Wal-Mart has already experienced it’s growth and transition phases of its business cycle and is more in their maturity stage of their business. As of 2010, Wal-Mart is the largest retailer in the world with more than $400 billion in annual revenues across more than 8,000 stores. It would be. It would not be justifiable to utilize the three-stage dividend approach in valuing such a mature company. Capital Asset Pricing Model (CAPM) Valuations for Wal-Mart CAPM Utilizing the fundamental concepts of the Capital Asset Pricing Model (CAPM), the expected return for Wal-Mart stock is 7.01% [E(R)]. This is a result of a risk-free rate (Rf) of 3.68%, which was the provided 10-year government bond yield to use as a proxy for the risk-free rate. The beta (ÃŽ ² ) of Wal-Mart was 0.66 according to the provided Bloomberg beta estimate. Additional data was provided on the U.S. market risk premium [E(RM) – Rf] of 5.05%. In following the general concepts of CAPM, there are some general assumptions: no transaction costs, all assets are publicly traded,Show MoreRelatedFinancial Outcomes Paper1657 Words   |  7 PagesCapital Valuation Paper University of Phoenix FIN / 419 – Finance for Decision Making November 3, 2009 Capital Valuation Paper Companies are evaluated to determine if they are risky to invest in. There are many tools that are used to conduct this evaluation. Part of determining Wal-mart’s financial health is to analyze their debt position. This is done by indicating the amount of other people’s money being used to generate profits. Long-termRead MoreCompany Analysis : Wal Mart Stores Inc.1044 Words   |  5 PagesMarket Perform to Underperform). This means that the stock is expected to do slightly worse than the market return (SP 500). 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