Question

write a summary of the results for the Marketability Ratios for Walmart and Target
Market to Book: Target -30.24, Wal-Mart:-17.07
P/E: Target: $14.80, Wal-Mart: $40.86
Dividend Yield: Target: 0.22% Wal-Mart: 0.21%

Answer 1

=> Market to Book Ratio: shows relation between market value of a share to book value and can help one to identify whether the share is undervalued or overvalued.

Target and Walmart are one of the largest retailers of the US and also a component of S&P 500 index.

Target Market to Book is 30.24 meaning that market capitalization (number of share * price of a share) is at 30.24 times the book value. The stock can be seen as a confident one in investors portfolio due to this overvaluation in the market and likely to go down from here in the near future (depending on certain market conditions). Whereas Walmart is trading fairly as per the size and revenues that the company has showed every year to its investors, this ratio of 17.07 looks good.

=> P/E Ratio: Price of the share versus earning of the company reported per share basis for a financial period

Walmart is PE is very high as compared to Target PE. PE can be manipulated by manipulating earnings in financial statements such as non recurring or exceptional items, over/under depreciation, profit/loss on a sale of property, significant provisions or assets write downs.

Problems with PE are: it cannot cope with negative earning, earnings can be manipulated, earnings can be volatile, and there can be problems with cyclical firms such as if there is trough of cycle = high PE, peak of cycle = low PE.

As per above, Walmart can be at a trough of its cycle and Target may be at peak (also suggested by the Market to Book Ratio of theirs)

=> Dividend Yield: Amount of dividend distributed in a year per number of share

Both Target and Walmart have been paying back similar to their investors. Since both are competitors and almost go neck to neck in the market, investors seems to have confidence in both the companies and they are being rewarded similarly as per their investment.

Obviously, the amount will be different for dividend by each company (since earnings and net profit will also be different) but both companies maintain similar dividend yield to maintain confidence among its investors.