Shareholder Analysis – Walmart Company
ANSWER
Walmart Financial Analysis
There is no doubt that Walmart is one of the most successful companies in the world. Their success narrows down to both its internal and external factors influencing their performance. The external factors include the political environment, global economy, environmental currency, among others (Greiner & Lee, 2020). For the year ending January 2021, Walmart recorded net sales of 555.23 billion dollars, a 7% increase for the previous financial year. The increase in profit is attributed to a good political environment under the Trump administration. For instance, in 2020, President Trump called for the revision of NAFTA, a move that led to the increment of $ 1 trillion to the U.S. economy. The government also dealt with the trade imbalance between China and the U.S., with the Chinese government manipulating the U.S. currency. Trumps’ administration ensured that Chia’s import faced a loss of $53 billion. Such political and economic trends are the factors that shape the operations and success of Walmart (Greiner & Lee, 2020). A reduction in imports means that the country relies on local products from companies like Walmart.
Walmart was also influenced by the prevailing environmental currency in the market, specifically bitcoin. In 2020 Bitcoin recorded its best-ever increase in value by experiencing an increase past the $29,000 mark, an increase of 224% (. Bitcoin has initiated a move to look for a cryptocurrency expert to help the company incorporate digital money currency into their operations. This is helpful both to the company and consumer and ultimately increases the company’s revenue.
In addition, the market conditions were also favourable for Walmart’s financial year ending January 2021. Market conditions like interest rates and Federal Reserve Bank monetary policies stabilize the economic market conditions for companies to thrive. The goal of the Federal bank is to promote maximum employment, stable prices and moderate long-term interest rates. Due to the spread and impact of the COVID-19 pandemic, the Federal bank lowered the interest rates to almost 0% in March 2020 (Leduc & Liu, 2020). This was as a result of companies experiencing losses and people losing their jobs as a result of the pandemic. However, this was an opportunity for Walmart to maximize the advantage of a 0% interest rate economy.
Walmart continues to enjoy this advantage since, as of July 2021, the federal funds rate is at a range of 05%-0.25%. The federal funds rate directly impact the prevailing interest rates of the economy. The lower the interest rate, like 0%, the lower the prime rates that consumers are charged on credit cards, mortgages and loans. Lower prime rates mean more consumers will be comfortable purchasing goods from high-end retail stores like Walmart, ultimately increasing their profits (Leduc & Liu, 2020).
Walmart performance for the year 2020 (key ratios)
Price-earnings ratios-23.88 meaning that Walmart shares trade in the market at around 24 times the earnings per share.
Price-to-Book Ratio-5.16
Return on Equity-7.2%
Debt/Equity Ratio-97.01% indicating a large level of debt.
Current ratio-0.79
Walmart performance for the year 2019 (key ratios)
Price-earnings ratio-5.01
Price-to-book ratio-27.58
Return on Equity -9.20
Debt/Equity Ratio-1.87
Current ration-0.76
References
Greiner, M., & Lee, J. (2020). U.S. companies and political influence: how business can read the government landscape better. Journal of Business Strategy.
Leduc, S., & Liu, Z. (2020). The uncertainty channel of the coronavirus. FRBSF Economic Letter, 7, 1-05.
Macrotrends. (2021). Walmart Financial Ratios for Analysis 2005-22=021. Retrieved from https://www.macrotrends.net/stocks/charts/WMT/walmart/financial-ratios
