Is it too late to buy Walmart stock now?

It’s easy to regret not buying stocks that have been running successfully. and walmart (WMT -0.12%) It’s certainly done well for investors over the years.

But companies cannot stay in the past, and investors should not take for granted that their success will continue. Deciding which path Walmart will take requires understanding the business and management’s plans for future growth.

Now let’s take a closer look at Walmart.

Image source: Getty Images.

Timeless Business

Walmart has a simple but attractive business concept. The idea is to minimize costs and pass these savings on to our customers. That way, rather than having a sale, you can maintain everyday low prices that are difficult for competitors to keep up with.

Offering savings to consumers is always attractive, but especially so during difficult economic times. In the early days of the pandemic, Walmart delivered strong performance, including an 8.6% increase in same-store sales (comps) at its U.S. stores in fiscal 2021 (ending January 31, 2021).

The Federal Reserve said it would keep short-term interest rates rising to combat inflation that could impact the economy. And there were signs of slowing economic growth, with the U.S. first quarter gross domestic product (GDP) growth rate declining to 1.6% from 3.4% in the previous period.

No one knows when a recession will occur, but it will inevitably happen. Walmart’s low prices mean there’s a good chance of increased deals.

Keep up with the times

Fortunately, management is not satisfied with current performance. Walmart has invested heavily in technology over the years to ensure that Walmart remains relevant and not overshadowed by competitors such as: Amazon.

We continue to improve our omnichannel capabilities and offer same-day pickup at many of our U.S. stores. There’s also Walmart+, a subscription service that offers benefits like gas discounts.

Undoubtedly, management’s ability to move forward has contributed to Walmart’s continued success. Although many popular retailers have filed for bankruptcy over the past few years, Walmart continues to grow sales and profitability. After foreign currency translation effects were removed, fiscal fourth quarter sales increased 4.9% and adjusted operating income increased 13.2%.

Dividend collection

The company’s profitability translates into generous free cash flow (FCF), which amounted to $17 billion last year. Walmart uses a portion of this massive FCF as dividends to reward shareholders. Not only does the board pay dividends, it has increased the dividend every year since it was first declared in 1974. In February, the company extended its dividend for the 51st consecutive year, and the stock is a dividend king.

Walmart’s dividend yield is 1.4%. S&P 500 index. But the company also offers strong growth prospects. This includes its fast-growing advertising business, which saw revenue rise 28% last year. Although $3.4 billion in revenue represents just 0.5% of Walmart’s overall sales, management will buy into it. vizioThis will help your business grow.

decision

Walmart’s stock valuation has become more compelling over the past year. The stock trades at a price-to-earnings ratio (P/E) of 32x, compared to 36x a year ago. By comparison, the S&P 500 has a P/E multiple of 27.

It’s not a cheap valuation, but remember that Walmart’s business is still healthy and its prospects remain bright even amid the recession. Despite the stock price rally, investors with a long-term perspective should consider buying the stock.