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Wal-Mart Is a Long-Term Buy, No Matter What Happens on Thursday

NEW YORK (TheStreet) -- Wal-Mart (WMT - Get Report) is scheduled to report its second quarter earnings before the opening bell on Thursday.  Based on the stock performance in recent market action, Wall Street is not expecting positive results as Wal-Mart is down for the last day, month, quarter, and year of market action. For 2014, Wal-Mart is off by more than 3% with the S&P 500 (SPY) up more than 5%. 

Despite that, there are three reasons for long term investors to be bullish about Wal-Mart.

Even though it is the world’s largest retailer, Wal-Mart is adapting.

Same store sales have fallen for five consecutive quarters. But Wal-Mart is moving to open more of the smaller facilities, which have done better. It is increasing its own in-store health clinics which should do well thanks to The Affordable Care Act increasing the number of patients and the amount of spending for medical treatment. The emphasis on secondary cities in China should also be more profitable for Wal-Mart.

Revenue continues to rise for Wal-Mart.

Analysts expect revenues to come it at $119 billion, up from $116.9 billion, according to FactSet. Wal-Mart’s days as a high growth stock are over. But growth has been steady and is projected to increase: Finviz reports that earnings-per-share for the next five years is projected to be 8.60%. That tops the rate of -3.20% for this year and the 7.60% for the last five years. Not only is that a bullish trend, it is a huge turnaround from this year’s performance of nearly 12% in the right direction.

Hard as it may seem to believe, Wal-Mart is a great buy as a value stock for what it sells to customers and what it pays to shareholders.

The price-to-sales ratio for Wal-Mart is now 0.50. That means that every dollar of sales is going for a 50% discount in the stock price of Wal-Mart.  By contrast, the price-to-sales ratio of Dollar Tree (DLTR) is 1.44. For Dollar General (DG), it is 0.99. Family Dollar (FDO) has a price-to-sales ratio of  0.85.  Wal-Marts’ price-to-sales ratio is down more than 14% from its peak in both 2012 and 2013.

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