Comparing Walmart (WMT) & Target (NYSE:TGT)

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Target (NYSE: TGT) and Walmart (NYSE:WMT) are both large-cap retail/wholesale companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, earnings, institutional ownership, risk, dividends and valuation.

Analyst Ratings

This is a summary of current ratings for Target and Walmart, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Target 1 11 8 0 2.35
Walmart 0 17 15 0 2.47

Target currently has a consensus price target of $72.47, indicating a potential downside of 6.15%. Walmart has a consensus price target of $96.03, indicating a potential upside of 14.61%. Given Walmart’s stronger consensus rating and higher possible upside, analysts plainly believe Walmart is more favorable than Target.

Dividends

Target pays an annual dividend of $2.48 per share and has a dividend yield of 3.2%. Walmart pays an annual dividend of $2.08 per share and has a dividend yield of 2.5%. Target pays out 52.7% of its earnings in the form of a dividend. Walmart pays out 47.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Target has raised its dividend for 50 consecutive years and Walmart has raised its dividend for 43 consecutive years. Target is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Target has a beta of 0.72, meaning that its share price is 28% less volatile than the S&P 500. Comparatively, Walmart has a beta of 0.53, meaning that its share price is 47% less volatile than the S&P 500.

Valuation & Earnings

This table compares Target and Walmart’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Target $71.88 billion 0.57 $2.93 billion $4.71 16.39
Walmart $500.34 billion 0.50 $9.86 billion $4.42 18.96

Walmart has higher revenue and earnings than Target. Target is trading at a lower price-to-earnings ratio than Walmart, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Target and Walmart’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Target 4.09% 23.34% 6.75%
Walmart 1.77% 17.16% 6.63%

Insider & Institutional Ownership

85.5% of Target shares are held by institutional investors. Comparatively, 29.7% of Walmart shares are held by institutional investors. 0.2% of Target shares are held by insiders. Comparatively, 51.1% of Walmart shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

Target beats Walmart on 9 of the 17 factors compared between the two stocks.

Target Company Profile

Target Corporation operates as a general merchandise retailer in the United States. The company offers beauty and household essentials, including beauty products, personal and baby care products, cleaning products, paper products, and pet supplies; food and beverage products, such as dry grocery, dairy, frozen food, beverage, candy, snacks, deli, bakery, meat, and produce products; and apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as intimate apparel, jewelry, accessories, and shoes. It also provides home furnishings and décor comprising furniture, lighting, kitchenware, small appliances, home décor, bed and bath products, home improvement products, and automotive products, as well as seasonal merchandise comprising patio furniture and holiday décor; and music, movies, books, computer software, sporting goods, and toys, as well as electronics that include video game hardware and software. In addition, the company offers in-store amenities, which comprise Target Café, Target Optical, Starbucks, and other food service offerings. It sells its products through its stores; and digital channels, including Target.com. As of March 8, 2018, the company operated 1,826 stores. Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota.

Walmart Company Profile

Walmart Inc. engages in the retail and wholesale operations in various formats worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, drugstores, and convenience stores; membership-only warehouse clubs; e-commerce Websites, such as walmart.com, jet.com, hayneedle.com, shoes.com, moosejaw.com, modcloth.com, bonobos.com, and samsclub.com; and mobile commerce and voice-activated commerce applications. The company offers grocery products, including meat, produce, natural and organics, deli and bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages, floral and dry grocery, as well as consumables, such as health and beauty aids, baby products, household chemicals, paper goods, and pet supplies; and health and wellness products. It also provides electronics, cameras and supplies, photo processing services, wireless, movies, music, video games, and books; stationery, automotive, hardware and paint, sporting goods, and outdoor living and horticulture; apparel for women, girls, men, boys, and infants, as well as shoes, jewelry, and accessories; and home furnishings, housewares and small appliances, bedding, home decor, toys, fabrics, crafts, and seasonal merchandise, as well as brand name merchandise. In addition, the company offers fuel and financial services and related products, including money orders, prepaid cards, wire and money transfers, check cashing, and bill payment, as well as consumer credit services. It operates 11,700 stores and various e-commerce Websites under the 65 banners in 28 countries. The company was formerly known as Wal-Mart Stores, Inc. and changed its name to Walmart Inc. in February 2018. Walmart Inc. was founded in 1945 and is based in Bentonville, Arkansas.

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