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Linked here is a detailed quantitative analysis of Walmart Stores, Inc. (WMT). Below are some highlights from the above linked analysis:

Company Description: Walmart Stores, Inc. is the largest retailer in the world, operating a chain of over 10,000 discount department stores, wholesale clubs, supermarkets, and supercenters.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

WMT is trading at a discount to only 3.) above. When also considering the NPV MMA Differential, the stock is trading at a 198.1% premium to its calculated fair value of $56.78. WMT did not earn any Stars in this section.

Dividend Analytical Data: In this section, there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

WMT earned two Stars in this section for 1.) and 2.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45% The company has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 49 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

The negative NPV MMA Diff. means that on a NPV basis, the dividend earnings from an investment in WMT would be less than a similar amount invested in MMA earning a 20-year average rate of 3.75%. If WMT grows its dividend at 1.8% per year, it will never equal a MMA yielding an estimated 20-year average rate of 3.75%.

Peers: The company's peer group includes: Costco Wholesale Corporation (COST) with a 0.6% yield, Target Corp. (TGT) with a 3.0% yield, and PriceSmart Inc. (PSMT) with a 1.5% yield.

Conclusion: WMT did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section, and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks WMT as a 2-Star Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $49.29 before WMT's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 49 years of consecutive dividend increases. At that price, the stock would yield 4.6%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 13.8%. This dividend growth rate is higher than the 1.8% used in this analysis, thus providing no margin of safety. WMT has a risk rating of 1.5 which classifies it as a Low risk stock.

WMT enjoys dominant positions in most markets where it competes. WMT's huge scale, geographic, and product diversities, aggressive cost savings strong international presence, and increased marketing of its core value message should deliver improved results in the long term. Going forward, WMT will face fierce competition from Costco, Amazon, dollar stores, and other such retailers. The stock is trading at a significant premium to the $56.78 calculated fair value. Until this changes, I will not add to my position.

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