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Walmart Versus Amazon: Current Standings

Walmart Versus Amazon: Current Valuations and Future Prospects

(Continued from Prior Part)

Recent performance

Amazon (AMZN) and Walmart (WMT) both declared their quarterly earnings recently. Amazon was able to beat the EPS (earnings per share) consensus estimates of -$0.15 handsomely when it reported a figure of $0.19. However, the same cannot be said about Walmart. Based on growth in the companies’ top line and bottom line for this quarter, Amazon has delivered better results. On the day of its 2Q15 results announcement, Amazon stock rose 15%.

Valuation multiples

When it comes to valuation multiples, the two salient factors that drive them are the fundamentals of the company as well as the future growth prospects. When we consider Walmart’s recent fundamentals, revenue runs into the billions, it has positive EPS, and its debt is 24.7%. However, Walmart still trades at much lower multiples than Amazon, which has had a last 12-month EPS of -$0.19.

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The reason for this difference is the future growth prospects of the companies. On the one hand, Amazon is in the e-commerce business that has a high potential for growth. On the other hand, Walmart is involved in traditional brick and mortar retail, which is stabilizing if not declining.

Now let’s look at how the multiples of these two companies fare against their industry peers. The above chart shows that Amazon (AMZN) is trading at a premium not only to Walmart (WMT), but also to most of the companies in the SPDR S&P Retail ETF (XRT). Companies like Sears (SHLD), Tiffany (TIF), and Macy’s (M) are trading below Amazon (AMZN).

In the next article, we’ll have a look at the future of these two companies.

Continue to Next Part

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