Financial Analysis of Wal-Mart, Inc

Financial Analysis of Wal-Mart, Inc

Abstract

This study is aiming to analyze some financial ratios and policies adopted by Wal-Mart, Inc. so as to decide whether the company represents a good investment opportunity. In the study, I have analyzed some of the commonly used liquidity, solvency, and profitability ratios as well as some stock information as well as the capital structure of the firm to be able to arrive at a sound investment decision.

Financial Analysis

Walmart 2012 1Q results are quite good. 1Q revenue is up by +8,5% compared to previous year 1Q from 104 bn.$ to 113 bn.$ Income before depreciation is also up by +8,1% from 5,4 bn.$ to 5,8 bn.$.

Main driver of revenue and profit increase was increase of Walmart International sales by +15%. Sales in US increased by 6% Sams Club by 8%. Largest sale generator remains Walmart US which generates ~60% of all revenue. If you look at profit increase you will see a 21% increase in Walmart International profit which means that not only did the sales increased but also its profit margin which is very good. As Walmart International has quite strong positions in China, India, Brazil and Mexico a strongest growing markets. Since companies market in Europe is very small companies sales geography guarantees sustainable growth in coming few years. In general sesults 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 below 1 liquidity ratio which has dropped to 0,83 at Q1. But this ratio is normal to all supermarkets as this is they key thing in their business bet 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 33 days, account payables 39 both in line. This differences makes to 10 bn.$ in working capital surplus which fun companies long term asset like stores acquisition.

Low equity level allows to have good return on asset. Its around 20% at first 3 quarters and around 30% ar Q4 sale 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 quite normal level. In general companies balance sheet can be treated as a bit risky.

Share value

Equity ...