ecent 18.9% 10-year dividend growth rate. Wal-Mart’s latest annual revenue is approximately 200 billion, about 5 times that of their closest competitor Sears. Wal-Mart's income growth trends are some of the best in their industry. They continue to be on the upswing and are practically killing companies like K-mart, who have had consistently negative growth over the past five years. Wal-Mart’s latest annual income was over 6 billion dollars with 15.9 percent income growth over a 10-year stretch. While many of their competitors are in the negative growth phase, Wal-Mart continues to become even more dominant in the industry. Revenue and growth don’t always tell the whole story. There are much better ways to measure a company’s financial strength such as return on equity, debt/shareholder equity ratio, and net profit margins. There are no foreseeable problems with the net profit margins of approximately 3% (net profit margins are management’s ability to turn sales into profits). However I do think that Wal-Mart’s current debt to equity ratio may be having an adverse effect on the true return on equity, according to Warren Buffet’s philosophy. Mr. Buffet is a conservative investor yet one of the richest men in the world. Wal-Mart may be inflating the returns on equity with the use of leverage. What this means is that instead of Wal-Mart issuing new shares to finance their growth, they may be borrowing money in the form of debt, which will ultimately water down the owner’s actual claims to the company. For example, if Wal-Mart decides that it is better for the company to take on more debt to finance their activities, the percentage claim that investors have in the form of equity will decrease. This is true even if Wal-Mart profits from this borrowing by showing increased net income and high returns on that equity portion of the company. The net effect remains that the company i...
