Shares are up since the big retailer’s latest results, pushing this key metric farther out of whack.
A big, well-known retailer may offer investors some comfort as they seek reliable companies selling essential stuff during an inflationary period.
But when that stock is already at above normal valuations, it’s a different story.
Last month, just before the Russian invasion of Ukraine, Walmart (WMT) – Get Walmart Inc. Report posted quarterly and full-year results that topped estimates and included better-than-forecast sales guidance.
But as Real Money’s Paul Price noted at the time, “The firm’s five and 10-year annualized growth metrics have been puny. Not much better is expected over the coming three to five years either.”
The company carried a 20.7 price-to-earnings ratio at the time of its last results. But, in an era when Walmart has reported single digit growth year for years, and when analysts expect that to continue, it’s unjustifiable, Price argued.
“Since 2011, WMT’s average P/E was 17.5-times. Recent years saw it expand to as high as 27.7-times at December of 2020’s peak of $153.70. Buyers back then paid too much. They are still well underwater more than 13-months later, despite the end of fiscal 2022 report.”
Still, investors have bid Walmart up since its February results. That’s likely due in part to retail’s appeal as a defensive play in inflationary times as well as the size and staying power of the Dow Jones Industrial Average component.
But those gains have only moved the stock further towards some of “its most pricey valuations of the past decade,” as Price noted.
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Walmart is a holding in the Real Money Action Alerts PLUS portfolio.
