Please note! This essay has been submitted by a student.
Wal-Mart Stores, Inc., which does business as Walmart, is a multinational retail corporation based in the United States. It operates an extensive chain of hypermarkets, discount department stores as well as grocery stores. Its headquarters are located in Bentonville, Arkansas. I chose this company as it is old at the New York Stock Exchange as it was listed back in 1972. It rose in just a few years from a regional giant to a national giant; it is also the largest company by revenue in the whole world according to Fortune Global 500, and it is also the world’s largest private employer with over two million employees (Pignataro, 2013).
Walmart is a good stock investment. This can be mostly be attributed to its gigantic profits that it generates every year. These profits are invested for future growth of the company, and the chances of Walmart creating zero profits is minimal next to impossible. This shows that the company will ever be able to be a strong dividend payer as a result of the positive cash from assets as well as invested funds; Walmart’s dividends are not only safe but also their increase is sure as per all expectations (Pignataro, 2013). However, with the world slowly drifting to online shopping, Walmart’s growth can come to a screeching halt as it is an in-store experience. This poses a threat to stock investments at Walmart as it is expected its dividends increase going forward to be questionable (Robbani & Bhuyan, 2016).
Stock investment at Walmart is a lower risk compared to other stocks as a whole. This is because Walmart is ever growing. In fact, it is the largest revenue generator in the world; it is more of a medium-sized country than a corporation, and if it were a country, it would be the 26th biggest economy. This means it is far much better compared to any other stocks. The risks are further reduced as Walmart extends out globally by entering into new foreign markets which mean more making of profits. Walmart’s stock has outstanding growth in dividend partially due to its international growth potential (Pope & Pope, 2015).
Walmart is bigger than any of its competitors. For example in discount stores, Walmart dominates in the market considering its sheer size. The competitor that can be said to be the Walmart’s primary competitor is Target, which has been carving out the market share through advertising and hip design partnerships. Other of its competitors are Costco Wholesale Corp and Dollar Generation Corporation, but they are far much behind. Furthermore, Walmart is the largest retail company in the world having over 10, 700 stores 4, 500 of which stores are in the United States while Target has approximately only 1, 795 stores in the United Stores. Financially, Walmart is always the leader. In 2015 its total assets amounted to $203.7 billion, this figure is five times bigger than its biggest rival, Target (Pignataro, 2013).
Walmart is growing at a fast rate as it continues to open new stores globally. The growth is also due to its low prices hence winning most of the consumers, more than 100 million customers visit Walmart stores globally per week (Pignataro, 2013). The growth is also a result of Walmart continuously finding new sources of growth by investing heavily in other formats; this includes neighborhood markets which are smaller groceries, warehouses and supercenters in the suburbs (Robbani & Bhuyan, 2016).
Walmart has high profitability; in 2016, Walmart so far has a net profit margin of 3.07% which indicates high profitability. This is calculated by dividing the net income by revenue. The profits for Walmart improved from 2014 to 2015 however it deteriorated from 2015 to 2016. It generated $485 billion revenue in the 2015 financial year (Robbani & Bhuyan, 2016).
Walmart’s price to earnings ratio (P/E) in 2016 is 16.05, in 2017 the ratio is expected to be 17.25, in 2018 it estimated that the ratio would be 16.37 and in 2019 it is expected to be 14.91. (Pignataro, 2013). This ratio is used to measure the stock evaluation. Considering the 2016 and 2017 ratios, it can be deduced that most investors are and will be willing to pay good money for each dollar of earnings. This shows that it will be a good place to carry out stock investments as the dividends are expected to rise as in 2017, the ratio of 17.25 suggests that the investors in the stock will be willing to pay $17.25 for every $1 of earnings that Walmart generates which is a good amount (Robbani & Bhuyan, 2016). Walmart has dividends. For the past five years, Walmart has had dividend yield of 2.02% at minimum, 3.46% at maximum. This gives an average of 2.50%. For the minimum, it was on October 15, 2012, while the maximum was on November 13, 2015 (Pope & Pope, 2015).
The future of Walmart promises especially with the daily growth that is taking place every day, new stores being opened, entering into new foreign markets all over the world, venturing into new entrepreneurship and others. Walmart also has many other ways it can improve meaning it has not exhausted all its expansion methods; this means there are big room movements for the company growing even bigger, generating more revenue as well as making bigger profits (Pignataro, 2013). This will also increase shareholder value which in fact is a major goal for Wal-Mart Stores, Inc. in the United States; the company is building new stores as well as speeding up the pace of its remodels as it has been successful at winning and sustaining customers (Pope & Pope, 2015).
Wal-Mart Stores, Inc. trades on the New York Stock Exchange and its ticker symbol is WMT (Pope & Pope, 2015). I recommend Walmart as an investment in stock for investors. This is because the dividends are most likely to increase with time as seen in this paper (Pignataro, 2013). Walmart has an excellent financial structure and investors have all the reasons to invest in its stocks as the trends show that Walmart will be making exceptional thrives ahead (Robbani & Bhuyan, 2016).