Looking at a chart of Wal-Mart Stores, Inc. WMT 1.53% over the past 20 years, it’s hard to argue that it hasn’t been a spectacular investment. The stock has gained nearly 700 percent since the beginning of 1995, more than double the return of the S&P 500 during that span.
But with the emergence of fierce online competition from the likes of Amazon.com, Inc., Costco Wholesale Corporation and others, is Wal-Mart still a safe place for investors to put their money?
The Fundamental Picture
At current price levels, Wal-Mart’s price to earnings ratio (PE) of around 17 is slightly below the average for the overall market. A PE of 17 is certainly not atypical for Wal-Mart historically.
Although nobody is putting Wal-Mart out of business any time soon, competition and saturation has taken a bite out of its growth rate.
Wal-Mart is projected to grow earnings at only 5.7 percent annually over the next five years. This low growth rate is why the stock currently has a price to earnings to growth (PEG) ratio of over 3.0. A high PEG could be cause for concern for investors, although Costco’s PEG is over 2.7 as well.
The Technical Picture
From a technical perspective, Wal-Mart stock looks…
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