With shares of Wal-Mart Stores Inc. (NYSE:WMT) trading at around $68.52, is WMT an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

When it comes to retail, investors are now concerned about higher payroll taxes. In the case of Wal-Mart, everything evens out in the end. On the negative side, higher payroll taxes will cost the average consumer between $18 and $20 per week, which means low-income earners will be more selective and budget-conscious with their purchases. On the positive side, this could lead to middle-income earners looking for better bargains than wherever they currently shop, and Wal-Mart fits the bill. Therefore, if the stock price gets hit because of higher payroll taxes, it may present a buying opportunity.

In other news, Wal-Mart is getting involved in the health insurance business. More specifically, Wal-Mart would like to offer low-cost health insurance to small businesses. If this is played correctly, Wal-Mart could do very well in this area. Wal-Mart has some experience in the industry, having partnered with Humana (NYSE:HUM) to offer Medicare Part D prescription drug plans. Wal-Mart also has real estate listings in its Memphis store. This is a company that will continuously look for growth avenues, and it will step on anything and anyone in its way. This is exactly why so many people hate Wal-Mart, as well as why so many investors love it.

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for Wal-Mart is normal, but the balance sheet needs improvement. However, don’t be concerned about the balance sheet. Wal-Mart’s operating cash flow is over $27 billion. 




T = Technicals on the Stock Chart Are Mixed

Wal-Mart hasn’t been performing well over the past few months, but when you look at the big picture, you see a well-oiled machine. The past three years have been strong. Wal-Mart also pays a nice dividend. Wal-Mart is currently yielding 2.30 percent.



At $68.52, Wal-Mart is currently trading below all its averages.

50-Day SMA


100-Day SMA


200-Day SMA



E = Earnings and Revenue Have Been Steady

Earnings and revenue have both increased annually since 2008. This is uncommon.




When we look at last quarter on a YoY basis, we see an increase in earnings and revenue.



T = Trends Do Not Support the Industry

Trends support Wal-Mart, not the retail industry as a whole, and definitely not dollar stores. In regards to dollar stores, it’s going to be difficult for them to fight off Wal-Mart. It’s only a matter of time before Wal-Mart moves in.


Wal-Mart is an empire that continuously looks to expand its territory. This is meant in a physical sense as well as an industry sense. Ten years from now, it’s possible that Wal-Mart will be involved in many more businesses than it’s involved in today. This approach has backfired for many companies in the past, but that’s not likely to happen with Wal-Mart because of its extraordinary momentum and consumer base. As far as valuation goes, Wal-Mart looks attractive with a Trailing P/E of 14.06 and a Forward P/E of 12.70.

Wal-Mart is an OUTPERFORM.

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