On Thursday 17th of November WMT published Q3 results. As you know I am long WMT so I closely look what’s going on in company. Let’s see:

Financial presentation begins with guidance, slightly higher for FY2017, with adjusted EPS of $4.20 to $4.35 (previously $4.15 to $4.35) – well 1% is not a big change for me, but direction is OK.

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Well if we look on the table above we can see that sales was flat, which taking into account acquisitions is not good, but at the end of the day I do not expect WMT to grow too fast. It is traditional, stable business. What I expect is hefty dividend/buyback:

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Market cap is $215b and returned capital for Q1-3 is $11b. Assuming proportionally gives us around $15b return, so it is around 6.8%. Well done WMT, keep going!

As it comes to valuation (on next year consensus):

P/E = 16

EV/EBITDA = 8.1

Dividend yield = 3% (+ buyback)

For me valuation now is neutral. Remember that business I stable and not growing so fast (though I think buying e-commerce business is a good step). On the other hand there should be a premium in valuation for strong market position and quality. P/E 16 vs P/E ratio for S&P around 25 and P/E ratio for Aristocrats around 21 (my google docs shows only 17.7 for next year but I guess that growth of earnings is too optimistic, I will need to check it) is still not expensive. Also return yield of almost 7% is a very good result.

 

Summing up, valuation is neutral for me, business is doing OK (could be better, but it is OK), when I find another interesting opportunity to invest maybe I will sell WMT and buy it. For now I will keep my position.

 

Disclosure: WMT – long