Big-box retailer Walmart (NASDAQ:WMT) reported earnings on Thursday, and while they were good, they may not have been strong enough to justify the stock going higher. The company's revenue was up 5.9% for the second quarter and its comparable sales in the U.S. were up by 2.6%.
The disappointing comparable growth may have been what sunk the stock, as comparable sales are reflective of the company's true organic growth. Comparable sales only look at stores that were open a year ago, and they don't take into account closures or new store openings. So a comparable growth rate of less than 3% may have worried investors about Walmart's business slowing down.
Heading into Thursday, Walmart's stock was trading at around 40 times earnings, a high multiple for a business that isn't known for high growth. Thus, expectations would have been elevated going into the quarter. Even though Walmart delivered another solid quarter, the market may have been expecting far more. Walmart's stock was down on the news but it's still not near its 52-week low of $95.42.
Walmart's valuation has been declining since surpassing a $1 trillion market cap earlier in the year. Now, its valuation is closer to around $800 billion. It's still a behemoth in the retail sector, and it can be a great long-term investment to hang on to, for not only its growth potential but also its dividend, which yields close to 1%.
If Walmart's stock falls further, it'll simply be an even better buy for long-term investors.
