NEW YORK (TheStreet) -- Wal-Mart (WMT) - Get Walmart Inc. 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) - Get SPDR S&P 500 ETF Trust Report 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.

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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) - Get Dollar Tree, Inc. Report is 1.44. For Dollar General (DG) - Get Dollar General Corporation Report, 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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As the chart below shows, with increases in earnings-per-share expected to be far below that for Wal-Mart over the next five years, Dollar General and Family Dollar are selling at a much higher price-to-sales ratio.

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The chart below also shows how undervalued Wal-Mart is as a dividend stock.  At present, the average dividend yield for a member of the Standard & Poor’s 500 Index is 1.94%. Wal-Mart’s dividend yield of 2.6% is more than 25% higher. As a Dividend Aristocrat, Wal-Mart is one of only 54 stocks on the S&P 500 to increase the amount of its dividend annually for over 25 years.  

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Even with its current woes, the short float for Wal-Mart is only 2.19% (one of 5% is considered to be troubling for a company).  There is a dividend yield of 2.6% with a history of the amount being increased as Wal-Mart is a Dividend Aristocrat. Due to its size, Wal-Mart can do much more to capitalize on retail opportunities than Dollar Tree, Dollar General, or Family Dollar. With a dividend payment that has been increased annually for more than 25 years, Wal-Mart should be a rewarding holding for long term investors.

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

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

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TheStreet Ratings team rates WAL-MART STORES INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate WAL-MART STORES INC (WMT) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WMT's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $5,939.00 million or 21.35% when compared to the same quarter last year. In addition, WAL-MART STORES INC has also modestly surpassed the industry average cash flow growth rate of 11.54%.
  • WAL-MART STORES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WAL-MART STORES INC reported lower earnings of $4.86 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($5.15 versus $4.86).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market, WAL-MART STORES INC's return on equity exceeds that of both the industry average and the S&P 500.