Question

After conducting and finishing your mid term valuation project, what do you see in the company picked for you as the red flags or good signals for it as an investment? what conclusions has this valuation exercise given you about his company? My Comapany is Walmart

Answer 1

Ans. The wal mart company Never be too trusting while buying financial services. Everyone trying to sell a financial service is either hiding something or actively lying. Look out for the obvious red flag in the sales pitch by the distributor.such growth attracted the attention of Wall mart, the media and heads of state, propelling Enron into the class of Fortune's most innovative and admired companies. Inexplicably, when analysts and business writers started digging deeper into Enron's remarkable ascendancy and its financial statements, the realization that Enron's profitability was microscopic compared to its revenues meant that the quality of its earnings was non-existent.

As Enron raced ahead in revenues through perilous waters without the requisite number of lifeboats in the form of adequate corporate controls and a compensation system that rewarded dealmakers and executives lavishly with cash upfront for ill-conceived business ventures and phantom cash flow.

A red flag is a set of circumstances that are unusual in nature or vary from the normal activity. It is a signal that something is out of the ordinary and may need to be investigated further. Remember that red flags do not indicate guilt or innocence but merely provide possible warning signs of fraud.

Walmart hasn’t done anything different, but Target is getting its groove back. The big-box retailer just reported really good holiday numbers and hiked near-term and long-term earnings guidance.

A hiccup wouldn’t be too surprising either. The competition between  is a decades-long struggle, wherein wins and losses are exchanged with equal frequency. Target kicks Walmart’s butt. Then, Walmart bounces back and kicks Target’s butt. So on and so forth.

With Target bouncing back, it is not terribly unlikely that Walmart’s numbers start to falter this year. If so, Walmart stock could be due for some serious pain considering its historically high valuation. Walmart stock is priced for that and more at these levels. The current valuation is unsustainable, and makes the stock look particularly at-risk to any operational miscues.

Being aware of red flags is only step one and is usually not enough for the local government. Once a red flag is identified, you must take action to determine its effect. Evaluating the red flag may be accomplished by financial analysis, observation or by any other technique that tests an apparent weakness. Once the analysis is complete it’s time to move on to correct the situation.

Financial analysis has several applications when red flags are present. The most common is to determine what effect it has on the conduct of the local government. For example, what is the potential as well as the historical loss as the result of the red flag? What is the cost to prevent a potential loss from occurring and what will it cost to recoup the identified loss?

Wallmart (WMT) stock has been doing much better of late, reaching all-time highs, but its underlying financials could use some improvement. Let’s not get too optimistic. In fiscal year 2015, net income was $16.4 billion. That fell 10% to $14.7 billion in FY16, and 7% to $13.6 billion in FY17. Over the trailing twelve months, however, net income is down to $11.5 billion.

Walmart is the largest private employer in the world with some 2.2 million employees. It is among the top 3 biggest companies by revenue. Sam Walton was the richest man in the US between 1982-1988. Today, the Walton family fortune is estimated at $102.7 billion, according to Forbes. The Walton’s control 48% of Walmart.

Walmart such a huge success?Sam Walton was no genius. He didn’t invent anything. For the most part, he copied ideas from other retailers like Sears and Kmart. From the start at his Ben Franklin franchise, he was constantly at his competitor’s store across the street, checking how they were doing things. Sam lifted the self-service idea, the iron fixtures idea (instead of expensive wood), the hypermarket idea (from Carrefour), and so on. He drove a hard bargain with suppliers and flew (on an Air Coupe he bought for $1,850) around to pick the best locations for his stores. Sam Walton had a passion for retail from very early on. He loved all aspects of the business, especially, merchandising.

we believe that, as all great things, Walmart’s success was due to some combination of effort, focus, ability, and opportunity. Basically, Sam was the right person at the right place and time.