Should You Buy This Company That Will Benefit From People Getting Back To Work?
There are hiring signs everywhere across the United States right now.
As of May 12th, there were a record 8.12 million job openings in the United States.
But as of May 1st, there were still 16 million people out of work.
This is not the sign of a healthy economic recovery.
Things are so dire in some states that companies and even the states themselves are fighting to entice people back to work.
At least 21 states will end the $300 per week extra unemployment benefits early to get people back to work… The benefits were supposed to end September 1st. Now some states are ending them June 1st.
And Arizona is even going to give $2000 bonuses to people who find and get jobs soon.
States aren’t the only ones working to entice people back to work either.
Wendy’s is looking for people so badly they are offering to hire people today and pay people ½ their pay tomorrow.
Banfield Pet Hospital with locations throughout the U.S. is offering $2,000 to $60,000 signing bonuses to work depending on your job and experience.
And Caterpillar is offering welders a $2 per hour increase to wages after 60 days of work… Plus, its offering electricians and machine maintenance employees $5,000 toward moving expenses if they apply and get a job at their plants.
These are just a few examples… But they’re everywhere.
Today’s company is doing the same thing.
Back in February, Walmart (WMT) announced its going to raise up to 425,000 employees’ wages starting March 13th.
Many Walmart locations are understaffed… And these higher pay rates won’t only help pay current employees more – which gives both the employee and Walmart more security.
But it also helps Walmart sell more.
This cycle repeats for Walmart when it comes to the entire economy and getting everyone back to work too.
The more people who are off unemployment and working and earning higher wages… The more people will buy at Walmart and other places.
The more people buy and do stuff, the better the economic recovery becomes.
This is important because 70% of United States GDP is based on consumption… You and I buying and selling and doing stuff.
If people are making more, they’ll also spend more.
This won’t just help the economic recovery… It will also benefit Walmart enormously as the United States largest retailer/grocery chain.
Over the last few months, I’ve written 3 articles telling you to avoid Walmart… But is it a buy now as more people get back to work?
Let’s find out.
But before I get to that, if you want to see the past articles on Walmart and why I recommended you avoid it click the link below.
To learn why I told you to avoid Walmart use the link above.
Its an amazing business that dominates not only in person retail as it has for decades now… But its also becoming increasingly competitive online as well with the likes of Amazon.
And because of its “everyday low prices” people continued to shop at Walmart during the pandemic… But it didn’t just sustain business – it had a record 2020.
That’s continued into 2021.
On May 18th it reported more record numbers…
- Revenue was up 2.7% in the year-to-year quarterly period to $138.3 billion.
- Operating income rose 32.3% in the year-to-year quarterly period to $6.9 billion.
- Online revenue jumped 37% in the United States.
- And it increased its overall market share in the all-important grocery category in the quarter as well.
This isn’t good… Or even great… Its spectacular.
And this will grow as Walmart continues to increase its presence online… And as more people get back to work.
This is all fantastic… So, should you buy it now as the economic tailwind appears to be picking up?
Unfortunately, no… Its still too overvalued to buy now.
Its P/E is now 32.9.
Its P/CF is 12.6.
Its forward P/E is 26.3.
And its EV/EBIT is now a mind boggling 20.6.
On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.
And on EV/EBIT I look to buy stocks below 8.
These metrics combined show that WMT is massively overvalued right now.
And this means owning its stock does not give you a large margin of safety in investing terminology.
When you invest in stocks that have a margin of safety it makes the investment safer. And it also means you should expect to earn higher returns owning it in the coming years.
The inverse of this is also true…
When you invest in a stock without a margin of safety it makes the investment riskier. And it also means you should expect to earn less owning its stock going forward.
With WMT being so overvalued right now, its stock does not give you a large margin of safety.
And for this reason, you need to remain patient and wait to buy it.
Yes, even though it will continue doing great things.
If you wait, you’ll make more money and keep your retirement portfolio safer.
Recommendation – Avoid Walmart until its cheaper to protect your retirement portfolio.
And consider investing in some of these stocks instead for your retirement portfolio.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.
P.S. Breaking Poll – Should People Get Off Unemployment And Get Back To Work? Vote Here