Valuing Wal-Mart Stock
Wal-Mart was founded by Sam Walton in 1962 and was based in Bentonville, Arkansas. Wal-Mart in the successive years has grown to be the world's largest retailer and has more than 4000 stores worldwide. Wal-Mart employs 1.7 million workers worldwide and boasts of 138 million customers every week. Rachael Martin was an investment advisor and was tasked to valuate the Wal-Mart stock with the help of three widely accepted models i.e. dividend discount model, the capital asset pricing model and the price / earnings multiples.
Question 1: Assess the financial health of Wal-Mart based on the analysis of the company’s financial statements.
Response: The financial health of Wal-Mart …show more content…
Strengths * Brand Equity: Company's popular all over the world and the "we sell for less" brand image is in line with the company's strategy. * Cost Advantage: Superior supply chain which gives it an automatic cost advantage. * Economies of Scale: The firm can achieve economies of scale due to large scale in purchases. * Product Line: It offers a wide range of products which are offered at affordable prices and this keeps their customers happy. * Subsidiary / Diversification: They have a subsidiary to support their business model and further enhance their product offerings and income. * In house manufacturing line: Wal-Mart manufactures their own branded goods. * Employment Generation: Provider of 1.7 million jobs worldwide. | Weaknesses * Weak presence in major metropolitan areas: Mainly located in suburban areas. * Global Growth Strategy: Weak international presence especially in the developing nations. * Quality of products: Low quality of products due to low prices. * Product Recalls: High rate of product recalls. * Lack of a clear product focus: Because the company offers various products like clothing, stationary, food, furniture, etc it fails to focus on a clear product like its competitors. | Opportunities * Strategic alliances / joint ventures with global retailers: In order