Wal-Mart Case Study Example | Topics and Well Written Essays - 500 words

Wal-Mart - Case Study Example Therefore a person should possess strong financial, mathematical, communication and computer skills to perform the role of an equity analyst. Wal Mart is using the Dividend Discount Models to estimate the intrinsic value of the company. Wal Mart is using the Constant growth Dividend Discount Model to estimate intrinsic value of company and its perpetual growth in dividends. Equity analyst is using different method of estimating the growth of dividends. Firstly, estimate the historical dividend growth in a perpetual fashion. Secondly, future growth is estimated by the equity or financial analysts on the ground of recent data. Growth of dividend and in sale over several years is forecasted by estimating the historical value of stocks. In its financial statements, the average increase in shares has decreased as in 2009 they were 3,939 and in 2010 is 3,866 while sales has increased more than decrease in stock. In 2010 the annual growth of dividend is 14.7 while average growth till 2010 is 31.3 and all forecast is depend the value of historical values of stocks. Wal Mart is at the maturity stage of Three stage of dividends discount. This model calculates present stock price by using present value of all cash flows at the cost of equity. The Wal Mart has current earnings growth is 10.40 per cent with $ 1.09 payout ratio on $ 3.72. Therefore at maturity its payout ratio would be 40 % of its earning. Wal Mart price/ Earning Ratio is used to estimate the intrinsic value of stock. The P/E multiple of Wal Mart was 14.23 times. According to the analyst Wal Mart is current value is depend on the heavy traffic of customers or US benefits while risk is attached with the political, economic condition of the country where this store is operating and wage laws. A price earnings ratio 1 is assumed risky while 20 expressed is good to do business for