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Few companies are as polarizing as Wal-Mart Stores (NYSE: WMT) in the general view of the public. Some people love having a Wal-Mart nearby and feel they are a source of jobs and low priced goods. Others dislike the company because when a store is opened in a community, smaller mom-and-pop type stores tend to go out of business as they lose customers. They can’t compete on price with a company that has the buying power that Wal-Mart does.
Still others don’t like Wal-Mart due to some of their business practices. They argue that the company takes advantage of labor markets around the world to manufacture the goods they sell. The wages paid at the manufacturing facilities are so low that the workers have to work unreasonable hours and still may be below the poverty line in that country.
Regardless of how you feel about Wal-Mart the company, the stock has done next to nothing for the past 14 months. The highest price during this time is $80.35 and the lowest price is $69.85, essentially creating a range between $70 and $80 per share. If you bought the stock in the last year, the worst you could have done was lose just over 11%, and that’s if you bought the stock at the exact high and sold it at the exact low. Conversely, if you bought it at the exact low and sold at the exact high, the gain would have been a whopping 14.4%. Considering that the S&P is up over 18% in the past year, that doesn’t get me very excited about Wal-Mart stock.
Looking at the weekly chart, we see the range the stock has been in and we see that the weekly stochastic readings are headed down which suggest the stock likely is too—at least for the next few weeks.
Looking at the recent fundamental performance of WMT, there may be a good reason the stock is range bound. The EPS report for last quarter showed a decline of 1.0% and over the last three quarters, the EPS has been flat. Even if we go out over the last three years the EPS growth rate is only 7.0%. The sales performance isn’t any better than the EPS performance either as sales only increased by 1% last quarter and the three-year sales growth rate is only 4%.
WMT does pay a dividend, so at least it can provide you a return that way, but the dividend is only 2.5% at this point, so it isn’t even paying what 10-year treasury notes are paying. I don’t see much changing for Wal-Mart stock in the near future, so I would recommend staying away. If you own Wal-Mart stock and want to hold on for the dividend, I would recommend doing some covered-call selling in order to boost your return while the stock is mired in this range.
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