February 20, 2015

Valuation Watch: Overvalued stocks now make up 60.15% of our stocks assigned a valuation and 20.93% of those equities are calculated to be overvalued by 20% or more.  Twelve sectors are calculated to be overvalued--with six at or near double digits.

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Wal-Mart Stores, Inc.(WMT) is the world's largest retailer. They are engaged in the operation of mass merchandising stores, which serve their customers primarily through the operation of three segments, which are the Wal-Mart Stores segment, the SAM'S Club segment and the International segment.

The company made news this week by announcing plans to raise wages for full-time workers to a minimum of $10/hour by February, 2016. According to the company, with the increases to starting pay and across-the-board raises, average hourly wages for full-time employees will increase to @$13/hour.

CEO Doug McMillon noted that the company's reputation for poor labor practices had hurt WalMart and claimed that "we’re strengthening investments in our people to engage and inspire them to deliver superior customer experiences.”

The company has been under pressure from politicians, customers, media, and workers due to its low wages, the use of public assistance by employees, scheduling practices, etc. The changes to the company pay scale are expected to cost the company @$1 billion/year.

It will take a while to figure out the effect of the increased wages on the bottom line, but analysts note that the company already had to increase wages in many stores because they were paying below the minimum wage of $7.25/hour as set by the federal government

VALUENGINE RECOMMENDATION: ValuEngine continues its HOLD recommendation on WAL-MART STORES for 2015-02-19. Based on the information we have gathered and our resulting research, we feel that WAL-MART STORES has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE Company Size but UNATTRACTIVE Earnings Growth Rate.

Below is today's data on WMT:

ValuEngine Forecast
	Target Price*	Expected Return
1-Month	83.71	0.22%
3-Month	84.39	1.04%
6-Month	84.40	1.06%
1-Year	85.77	2.69%
2-Year	90.18	7.97%
3-Year	73.00	-12.60%

Valuation & Rankings
Valuation	13.24% overvalued	Valuation Rank(?)	31
1-M Forecast Return	0.22%	1-M Forecast Return Rank	68
12-M Return	11.58%	Momentum Rank(?)	69
Sharpe Ratio	0.61	Sharpe Ratio Rank(?)	83
5-Y Avg Annual Return	9.28%	5-Y Avg Annual Rtn Rank	68
Volatility	15.09%	Volatility Rank(?)	91
Expected EPS Growth	1.99%	EPS Growth Rank(?)	26
Market Cap (billions)	269.14	Size Rank	100
Trailing P/E Ratio	16.60	Trailing P/E Rank(?)	71
Forward P/E Ratio	16.28	Forward P/E Ratio Rank	53
PEG Ratio	8.35	PEG Ratio Rank	4
Price/Sales	0.56	Price/Sales Rank(?)	81
Market/Book	4.13	Market/Book Rank(?)	31
Beta	0.47	Beta Rank	79
Alpha	0.08	Alpha Rank	75

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Read our Complete Detailed Valuation Report on WalMart HERE.

Sector Talk--Retail/Wholesale

  Below, we present the latest data on Retail/Wholesale stocks from our Institutional software package (VEI).    Top five lists are provided for each category.  We applied some basic liquidity criteria--share price greater than $3 and average daily volume in excess of 100k shares. 

Please Click Here to Download a FREE Demo of ValuEngine's Professional VEI Software Package.

Top-Five Retail/Wholesale Stocks--Short-Term Forecast Returns

Top-Five Retail/Wholesale Stocks--Long-Term Forecast Returns

Top-Five Retail/Wholesale Stocks--Composite Score

Top-Five Retail/Wholesale Stocks--Most Overvalued

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What's Hot--

VE Forecast Market Neutral Newsletter

Our portfolio posted another excellent gain this month. Our 50/50 allocation's pick up of 10.15% beat the benchmark MLSAX's* gain of 1.09% by 906 bps. The modified stop-lossed strategy with a suggested 60-40 allocation gained even more with a pick up of 12.74%. The trailing 12 month percentage return is 3.62% for the newsletter and 11.07% for the MLSAX Long-Short Fund. Since inception, our portfolio has returned 105.43% vs the MLSAX return of 123.8%.

Find Out More About the VE Forecast 16 MNS HERE

Longs were once again stunning this month with thirteen winners for the second month in a row. Nine of our stocks were well above or near double-digit returns. Valentine's Day was good to us as 1800Flowers.com returned a whopping 39% and led our long side. Our shorts featured seven winners with Leapfrog's gain of 34% helping to preserve our portfolio's big pick up overall.

We have had a switch to an overvalued condition this month thanks to the market's latest rally. 60.15% of the stocks we can assign a valuation are calculated to be overvalued-- with 20.93% of them calculated to be overvalued by 20% or more. We remain bullish on US equities and find that the better job market—Wal-Mart just announced a minimum pay rate of $10/hour in response to employee action and wage pressures—is further evidence (finally) of a full-force US recovery. Unrest elsewhere has led to a stronger dollar and the new found US dominance in certain forms of energy is a great help as well.

Here are the primary long and short-side selections and their performance for the month.

Find Out More About the VE Forecast 16 MNS HERE

AAII Selects ValuEngine.com "Best of the Web"

The American Association of Individual Investors (AAII) was founded in 1978 by Dr. James Cloonan. Its purpose is to distill current financial theory and academic knowledge in a manner which allows its members to beat the market. In short, AAII's philosophy and membership base is a perfect match for ValuEngine's various newsletters, website services, and other products.

ValuEngine clients access proprietary stock valuation data on more than 4000 US equities in addition to forecast and ratings for more than 8000 stocks. They can also purchase ready-made portfolios based on all of our data which are designed to fit a variety of investment styles and risk/reward profiles.

ValuEngine is always searching for self-directed investors who recognize the value of our services--just like the members of AAII, and for that reason we are proud to announce that we were recently selected one of AAII's "Best of the Web" services.  AAII puts Valuengine.com within the "top 16 sites for consensus analyst estimates, ratings and recommendations, stock screening, and stock valuation.

It is important to note that in an era of free content, apps, and services, ValuEngine has almost always been the only fee-based service to win a stock valuation award from AAII. We have won this award numerous times and AAII notes that

ValuEngine provides a wide range of services for individual investors and is an excellent source for stock valuation. It was chosen as Editor’s Choice because of its in-depth analysis and innovative valuation techniques that are not available at other sites.

ValuEngine CEO Paul Henneman has always been a strong supporter of AAII's program and services for individual investors and noted that "ValuEngine's objective, cutting-edge research provides the tools for any investor looking to reduce management fees and handle their own portfolios. Savvy individuals, Wall St. professionals, and the leaders of AAII have known for years that ValuEngine.com offers an outstanding suite of products which an help improve returns and beat the market. So, we are of course pleased to be recognized by AAII for yet another year."

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The ValuEngine View Newsletter is the product of a sophisticated stock valuation model that was first developed by ValuEngine's academic research team. It utilizes a three factor approach: fundamental variables such as a company's trailing 12-month Earnings-Per-Share (EPS), the analyst consensus estimate of the company's future 12-month EPS, and the 30-year Treasury yield are all used to create a more accurate reflection of a company's fair value. A total of eleven additional firm specific variables are also used. In addition, the portoflio uses top picks from our Forecast Model. In essence, the portfolio is constructed with the best picks from our main propiretary models

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