Walmart’s forward price-to-earnings ratio at the end of 2008 was 12.90, as presented in Exhibit C. The company’s competitors’ forward P/Es fell relatively near to this figure, ranging from 10.89 (Target) to 18.23 (Costco). The industry average for general merchandisers between 1998 and 2007 was 18.31. Walmart’s forward P/E suggests that, compared to competitors and the rest of its industry, the company is expected to grow earnings at a slower pace. This aligns with the expectation that one of the world’s largest companies will be hard pressed to grow at a “fast” pace. The value-to-earnings ratio for Walmart breaks down into the use of two forward-looking figures, in an attempt to achieve a performance measure more theoretically precise. The V/E ratio Walmart reveals is typical of a company in its industry and suggests modest expected future growth.
Other posts on Wal-Mart financial analysis:
Wal-Mart: Comparison of ROCE for Wal-Mart’s Alternative Cash Management Strategies
Analysis of Wal-Mart Financial Ratios
Analysis of Wal-Mart Financial Ratios, P/E Growth
Analysis of Wal-Mart Financial Ratios, P/B
Wal-Mart: A Potential Management Issue Resulting from Excess Cash
Analysis of Wal-Mart Financial Ratios P/E, V/E
Wal-Mart in the News, Adoption of Eco-Friendly Activities
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