Instructor: Dr. Eric Fricke
Name(s): Hong Le
Kim Loan Vu
Valuing Wal-Mart 2010
1. What would be your investment recommendation on a scale of 1 to 5 with 1 = strong sell, 2 = sell, 3 = hold, 4 = buy, and 5 = strong buy. Our investment recommendation is 4 = buy because price to book value for Wal-Mart has a lowering trend, which seems to show that it is becoming a safer and a more stable stock to invest in. The Dividend yield for Wal-Mart is lower than the industry average, signifying that Wal-Mart is using its cash revenue to reinvest in the company. Wal-Mart is still viewed as an expanding company because of their huge expansion plans for the upcoming years. Compared to its competition it has a more robust operating foundation because of the management systems they have applied. This has helped to create extraordinary turnovers for receivables, inventory, and assets. All these factors have supported Wal-Mart stock being a good buy.
2. Describe the role of an equity analyst.
The role of an equity analyst is to analyze financial data and trends of a company. The analyst has to response for the company investment potential by predicting the environment of market in order to buy, sell, or hold its shares. An equity analyst may also have to pay attention to everything that may have impact on business’ finances as well as analyze the budget and come up with a plan to get out of debt. For example, analysts believe that Wal-Mart will continue to increase profits because its annual earnings growth forecast of 10.40 per cent for the next five years. As a result, many analysts recommend to buy more shares of Wal-Mart in the year of 2010. In the case of Wal-Mart, there are three methods for analysts to determine the value of the company. The first one is called the dividend discount model which is determined the current stock price of the company representing the...