Dividends, Free Cash Flows, And Positive Comparable Sales:

This company had another excellent quarter that sent share prices higher as investors were faced with the retail giant remaining strong again. The real story begins with operating income in constant currencies. The pressure there wasn’t that bad for what was supposed to be a hard year. The dogma about retail is about all declining comparable sales, but the company posted increases again with more expected in the next quarter. It has exceptionally strong free cash flows, and its share buyback program was so successful total dividends declined. Dividends to each shareholder were up of course, the retirement of so many shares simply exceeded the growth rate in dividends.

Wal-Mart (NYSE:WMT) delivered a beat on earnings with a miss on revenue. Any poorly scripted automated news site can tell you that. Let's dive deeper into the real story that sent Wal-Mart shares higher, because it was not beating on earnings by a penny. The relatively low multiples for Wal-Mart indicate a company Wall Street refuses to believe in. The company was trading at exceptionally cheap valuations for price to earnings, EV to EBITDA, or price to free cash flows. Those low multiples depend on Wal-Mart being unable to continue growing. If Wal-Mart is growing same store sales even slightly while rapidly buying back stock and paying out their dividend, the total return picture looks pretty solid. There is also the challenge of significantly higher wages for their lower level employees.

Source: Seeking Alpha

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