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Is The New Wal-Mart?

The question in this article's title is quite relevant. Very often, the answer is said to be yes and it represents one of the strongest reasons to buy (AMZN) stock. Because who wouldn't want to have bought Wal-Mart (WMT) back when it was of a similar size to today?

Thankfully, we can provide an answer. We can do it because Wal-Mart has an excellent website which includes all its annual reports back to the 70s.

Our first problem is establishing when Wal-Mart was of a similar size to today. If we were to simply compare dollar revenues, we'd be introducing a significant distortion because of inflation. Wal-Mart was doing about as much revenues as is today back in 1994. But remember, selling $1 billion in merchandise in 1994 was not the same as selling $1 billion today.

We thus need to correct Wal-Mart's numbers by a consumer price index just to establish when it really was similar in size to So starting from's 2012 revenues, $61.1 billion, we need to find the year in which Wal-Mart's revenues were closest to this figure, inflation adjusted.

The closest years end up being 1992 and 1991. In 1992 Wal-Mart did $43.9 billion in revenues. The CPI index was at 140.3 versus 229.594 at 2012 year-end, which means those revenues were similar to doing $71.8 billion in today's dollars. In 1991 Wal-Mart did $32.6 billion in revenues. The CPI Index was 136.2 versus 229.594 at 2012 year-end, which means those revenues were similar to doing $54.9 billion in today's dollars.

Knowing this, I'll use 1992 as the base year to compare Wal-Mart to today. I'll be drawing extensive data from Wal-Mart's 1992 annual report.


There are several conclusions to be drawn from this profitability comparison:

- The main conclusion is that Wal-Mart and reside in different worlds. Wal-Mart never had the volatility or the earnings implosions which exhibits;
- Also, Wal-Mart's worse year is better than's best year in this comparison;
- Wal-Mart's earnings were also much cheaper for shareholders (as can be seen from the EPS as a percentage of share price);
- Wal-Mart's was much higher than's. Indeed, Wal-Mart's ROE was more than double the best year ever had (2010);
- Wal-Mart's EPS growth was much better than's. Indeed,'s earnings growth in this phase has turned deeply negative to the point where posted losses for 2012. While this is not expected to continue, it shows that is dealing much worse than Wal-Mart with this particular size. And as we've seen before, at this point in history Wal-Mart was growing as fast as, so growth is not an excuse.


Looking at Wal-Mart's size, growth, dividends, profitability and investments when it was the same size as today completely debunks the notion that is somehow behaving like the next Wal-Mart. is less profitable, has much higher earnings volatility, does not pay dividends, is not growing faster at this point and did not invest more than Wal-Mart at the same point in history.

Yet trades much more expensively than Wal-Mart ever did, in spite of being inferior to Wal-Mart on every count, even if we compare the year - 2010 - where had its peak profitability.

There is little else to conclude but the obvious. That is a bubble. Yet it's a bubble that keeps on inflating in spite of having issued lowered guidance for 9 quarters in a row and having seen its earnings drop all the way from a $2.53 EPS in 2010 to less than zero in 2012. All the while, expectations for 2012 were north of $5.00 per share in 2010 and posted losses yet the shares went higher.

Indeed, even for the present quarter, expectations were $1.01 two years ago. Today those same expectations stand at $0.06, a 94% drop, and I wouldn't be surprised if the market went and celebrated "a beat" under these unreal conditions.
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