Wal-Mart's Stock Price

Case Study # 101048

Business > Companies
Business > Finance, Investment and Banking

This paper evaluates Wal-Mart's stock price.

1,431 words () | 6 sources | MLA | 2008 United States

Paper Summary:

The paper provides a brief financial overview of Wal-Mart. The paper then utilizes discounted cash flow valuation techniques, relative valuation techniques, cost of capital and capital budgeting in order to determine if Wal-Mart's stock is over-valued, under-valued, or just right. The paper shows how, irrespective of the quantitative analysis employed, the calculated stock value for Wal-Mart falls within the threshold and the current stock price is close to current stock value.

Outline:
Introduction
Brief Financial Overview of Wal-Mart
Valuation and Rates of Return
Free Cash Flow Model
Dividend Discount Model
Valuation Techniques
Cost of Equity
Capital Budgeting and Risk

From the Paper:

"A stock is generally considered over-valued if the price-earning ratio is high relative to the rate at which a company's earnings are likely to grow. The converse holds true for an under-valued stock. Because of the complexity and importance of valuing common stock, various techniques for accomplishing this task have been devised over time. The techniques that will be used encompass: 1) discounted cash flow valuation techniques, where the value of the stock is estimated based upon the present value of some measure of cash flow, including dividends, operating cash flow, and free cash flow; and 2) the relative valuation techniques, where the value of a stock is estimated based upon its current price relative to variables considered significant to valuation; 3) cost of capital; 4) capital budgeting."

Sample of Sources Used:

Dicker, John. The United States of Wal-Mart. Penguin Group; 2005
English, James. Applied Equity Analysis: Stock Valuation Techniques for Wall Street Professionals, McGraw-Hill, 2001
Ehrhardt, Michael. The Search for Value: Measuring the Company's Cost of Capital. Oxford University Press; 1994
Hummer, Ryan. WMT: Competitive and Financial Analysis. Ohio State University Press; 2006
Penman, Stephen. Financial Statement Analysis and Security Valuation, 3rd Edition. McGraw-Hill/Irwin; 2006