Reference no: EM131460811
Assignment: Company Wal-Mart
This is a fundamental research, sector based assignment where you will select a company whose publicly traded shares your team concludes should be bought. You will need to examine the financials of any company you select, in particular profitability, cash flow, innovation, operating margins and the management team.
The primary objective of this project is to see whether your company is undervalued vs. its sector and what are the engines of growth for your choice.
Using a publicly traded company of your choosing, please provide the following:
1. Explain, in full detail, why this company should be purchased.
2. Describe the sector that your company is in, who are its primary competitors and what are the driving forces of growth?
3. How is your company viewed by the research community on Wall Street?
4. How has your company performed over the past five years? Vs. the S and P 500 index? Vs. its competitors? (Chart this and explain)
5. How has and will the macroeconomic environment affect your company? If so, how?
6. What is your company's fundamental strategy and are they maximizing shareholder value?
As one of the biggest retailers in the United Sates, Walmart is commonly known for selling wide variety of consumer goods at a very cheap price affordable to most low income earners. Like any other company, Walmart is affected by macroeconomic factors but they have come up with various strategies to minimize the effects and to improve their sales (Hill, Charles and Gareth 78). There are various claims that Walmart actually performs better during economic instability.
Inflation is one of the macroeconomic factors that affect the performance of Walmart (McEachern 124). When there is inflation, the customers are less willing to buy goods from Walmart stores. The company responds to inflation by adjusting the prices of their products upwards and this in turn leads to higher net sales. However, the high net sales are misleading because they have risen as a result of inflation.
The other macroeconomic factors that affect Walmart are the interest rates. As the interest rates rise the sales of Walmart tend to go down (Setili 67). The rise in interest rates affects the customer's' willingness to spend. When the interest rates are high, people tend to invest more and consume less. When people are spending less, the retail companies such as Walmart are hit hard and their net sale drop down. The company tends to reduce prices to encourage customers to purchase more goods.
Walmart is big company that has very many store located all over the world. Therefore the company reduces prices when the economy is not performing well and this encourages customers to purchase more goods (Fishman 44). The company can reduce prices below what others are offering and still make profits because it enjoys economies of scale. Recently, it is reported in Wall Street Journal that Walmart offered free shipping for more online orders comparing to the old ShippingPass system with lower minimum purchase (Nassauer), in order to attract new customers so that they can compete with their rival ---- Amazon. Unlike Amazon's $99 annual Prime membership fee, Walmart now requires no annual membership fees and promises shipments to be arrived within two days to most U.S addresses. In general, Walmart is always taking approache of lowering cost, not only from the purchase price but now also from the shipping cost. The company is therefore maximizing shareholders values through the use of these strategies.
7. Is your company affected by externalities, such as being correlated to the price of commodities, consumer spending, specific foreign countries' economies, regulation or any other specific variable?
8. What, if any, is the company's dividend policy? Do they have sufficient profitability of cash flow to service the dividend?
9. If your selected company is in an innovation oriented sector, are they being innovative enough to stay with or surpass their competition? Discuss new or promising products.
10. If the company has debt, do they have sufficient cash flow to service it? Explain.
11. Please chart all relevant ratios and other financials vs. the sector and explain their importance.
12. Please write this report as if it is going to be presented to a group of potential investors. So it should be professional in its presentation, including the writing and its look, highlighting the strong points of your paper and it MUST have a conclusion/summary.
Rules:
1. Each group must pick a different company.
2. 8 to 10 pages, double spaced.
3. Paper should include charts but no more than 20% of paper.
4. All sources must be accredited accordingly. This can be done by adding a back page. This is not included in the 8 to 10 pages.
5. All companies must be approved by me in advance since there will be no duplication of choices.
6. Structure, grammar, punctuation and professionalism all matter.