Wal Mart Analyzing Wal-Mart's Market Value Thesis

Pages: 3 (787 words)  ·  Style: MLA  ·  Bibliography Sources: 4  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

Wal Mart

Analyzing Wal-Mart's Market Value, P/E Ratio and Profitability

Wal-Mart's market value and continued profitability is directly attributable to the continual improvements in supplier relationship management and the use of technology to continually ensure the mass merchandiser reduces operating costs (Mottner, Smith, 535). This has been a highly effective strategy as the company continues to concentrate on its core market segment, the price-value shopper (Zimmerman, et.al.). According to Wal-Mart the price-value shopping segment of their customer base comprises 16% of all shoppers and is responsible for the majority of the profitability the firms achieves (Frazier, 34). As Wal-Mart has continues to concentrate on the unique combination of their supply chain, technology to enable greater efficiency, and on working to keep the price-value shopper loyal, the mass merchandiser has been able to increase Net Income and grow profitability despite a global recession (Zimmerman, et.al.). The intent of this analysis is to evaluate Wal-Mart's Market Value, Price-Earnings Ratio and Profitability.

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Thesis on Wal Mart Analyzing Wal-Mart's Market Value, P/E Assignment

With a market capitalization of $209B and Gross Margin of 24.55%, Operating Margin of 5.71%, and Net Profit Margin of 3.47%, Wal-Mart's strategy of concentrating on cost reductions through investing in streamlining their supply chains are working (Frazier, 34). Net Income actually increased through the recession, beginning at $8B in 2003, increasing to $13.4B at the close FY2008. Evaluating the Profitability Ratios of the last seven years for Wal-Mart also shows that the company has become very adept at internal efficiencies to increase the utilization of assets. The use of RFID technologies to better manage supplier relationships (Sodhi, Son, 937) and streamline inventory management have contributed to Return on Assets (ROA) stabilizing from 9.03 in 2003 to 8.17 in FY 2009. Return on Equity (ROE) has also stabilized despite a severe economic downturn impacting much of the retail industry globally. From 21.6 in 2003 to 20.58 in 2008, Wal-Mart continues to stabilize this aspect of their financial performance as well. These measures of financial performance are provided in Appendix A, Wal-Mart Stores Ratio Analysis, 2003 -- 2009.

Wal-Mart emphasizes the use of internal process improvement and a continual commitment to increasing supplier and distribution network performance based on disruptive technologies including Radio Frequency Identification (RFID) to also reduce costs. As a result of these strategies throughout the last seven years the company has been able to actually increase EBITA Margin… [END OF PREVIEW] . . . READ MORE

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