Is There a Tailwind Behind Walmart Shares?

By Susan Ramirez • Tuesday, October 04 16:11 • Permanent Link

Rising to a price of $134.3 during today's aftermarket trading session, shares of Walmart are still -11.87% below their average target price of $152.39. Could there be more upside potential for the stock? Analysts are giving WMT an average rating of buy and target prices ranging from $130 to $170 dollars per share.

The market seems to share this optimistic view, since Walmart has a short interest of only 1.1% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

We can make inferences about the market sentiment surrounding Walmart by analyzing its rate of institutional ownership. If institutions such as hedge funds and pension funds are the primary shareholders of a corporation, it most likely means that its shares are a good investment according to those institutions' analysts.

At 32.8%, the rate of institutional ownership is average, indicating that a sufficient number of institutions have concluded that it is a stable investment. Beware, however, that the rate of institutional ownership could also indicate an ongoing proxy battle or takeover attempt -- so you should also periodically check the news about a stock whose institutional ownership you are tracking.

Overall, there is mixed market sentiment on Walmart because of its an analyst consensus of some upside potential, a buy rating, a very low short interest, and only a small number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.

At a glance, here are some essential statistics you may want to know about WMT:

It has a trailing 12 month price to earnings (Eps) of $5 per share
Walmart has a trailing 12 month Price to Earnings (P/E) ratio of 26.9 while the S&P 500 average is 15.97
The company has a Price to Book (P/B) ratio of 4.7 in contrast to the S&P 500's average ratio of 2.95
Walmart is a Consumer Defensive company, and the sector average P/E and P/B ratios are 24.21 and 4.09 respectively

To never miss out on our deep dives into fundamental analysis of market moving stocks, take a moment to subscribe to our free newsletter.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.