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Wal-Mart Is Still Looking Good

What's more, Best Buy opted not to issue fiscal 2014 guidance, but the company warned that the first quarter will be under significant pressure, which may be related to a combination of the rollback of the payroll tax decrease and the delay in tax refunds.

Conversely, Target just posted 30% comp increase in January sales. The quarter is not over yet, but Target seems pleased about foot traffic. And it doesn't appear as if Target's customers are worried about refund checks.

For that matter, Wal-Mart guided first-quarter earnings to arrive at $1.11 to $1.16 per share on flat comps. This was slightly less than the Street's estimates. The company has made it known that it hated that the temporary reduction in payroll taxes was ending, which management has stated may adversely impact first-quarter and fiscal 2014 projections. Well, it's Wal-Mart. And I'm not really all that concerned about its concerns -- if that makes sense.

What I mean is that we've been here before. The company was still dominant at the height of the financial crisis, and it will be fine today. And the economy has been much improved since then. The fact is -- people aren't going to suddenly stop shopping for food and household goods. That flat-screen TV from Best Buy, however, might require more thought.

Bottom Line

For now, from an investment perspective, the stock is still trading at an attractive valuation. When compared to Costco (COST) and Target, which are both trading at higher P/E ratios, a case can be made that Wal-Mart is undervalued by at least 10%. With continued operational improvements and a recovering economy, patient investors should expect shares to approach the lower $80s by the second half of the year.

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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