After hitting a high of $91 per share earlier this year, shares of Wal-Mart (WMT) have retreated to the below the $60 mark today–trading at $59.37 at the time of writing. That gives Wal-Mart a 34% decline on the year. Given that Wal-Mart makes over $5 per share, the current valuation is between only 11x and 12x earnings.
The stock is now trading at a cheaper valuation than was available during The Great Recession when the stock traded at 13x earnings. The reasons for the cheap valuation has long been evident to long-term followers of the company: (1) it has 2,200,000 employees, and a significant percentage have received higher than usual wage increases in 2015; (2) the company generates 55% of sales outside the United States, and the strength of the U.S. dollar has understated earnings by over $0.30 on a constant currency basis; (3) we are six years into an improving economy, and Wal-Mart tends to deliver its greatest growth during unfavorable economic conditions when customers trade down a bit; and (4) the company only has 367 stores actually opening up in 2015 compared to the 600+ that are expected to open up in each year from 2016 until 2019.