Re: WMT vs. AMZN growth rates. While reading back through prior The Motley Fool Rule Breaker reports, I found the following, which I though I would take some effort to correct, as it is another example of the mathematical and financial illiteracy of the people analyzing AMZN:
*When one considers that Amazon is growing much more quickly than* Wal-Mart ever did ... fool.com
The gist of the article is that AMZN should be valued more highly because it is growing much more quickly than WMT. Even ignoring the profit history, and the different market segments, it is not possible to so easily compare companies that are growing at different rates.
I thought I would analyze WMT's revenue growth using the same techniques I did with AMZN's. This way I can produce estimates of WMT's future revenues. First, the raw data from TSCN:
HISTORICAL QUARTERLY RESULTS REVENUE (Thousands of U.S. Dollars) 1997 1998 1999 2000 1st Qtr APR 23,007,000 25,695,000 30,157,000 35,123,000 2nd Qtr JUL 25,844,000 28,704,000 33,880,000 3rd Qtr OCT 26,078,000 29,127,000 33,924,000 4th Qtr JAN 31,249,000 35,773,000 41,247,000
tscn.com
Note that WMT is growing beautifully, with no big changes in growth rates, and also note that the change in revenues over the whole 3 years was only +52%. This is not comparable to AMZN's growth, so instead I will go to edgar-online, and grab the annual sales data for as far back as I can (easily) get it. But I might as well take a look at what these quarter's data looks like:
**WMT Growth Rates 1Q98 to 1Q00:**
Yearly Growth Date Revenue Increase Change Lossage ---- -------- -------- ------ ------- 1Q97 23007 2Q97 25844 3Q97 26078 4Q97 31249 1Q98 25695 11.7% 2Q98 28704 11.1% -0.6% -5% 3Q98 29127 12.7% 1.6% 14% 4Q98 35773 14.5% 1.8% 14% 1Q99 30157 17.4% 2.9% 20% 2Q99 33880 18.0% 0.6% 3% 3Q99 33924 16.5% -1.5% -8% 4Q99 41247 15.3% -1.2% -7% 1Q00 35123 16.5% 1.2% 8%
This is good clean growth, with no big change in growth rate. The lowest growth rate recorded was 11.1%, while the highest was 18.0%. Surprisingly, the trend is mildly up. The figures for AMZN over its quarterly data range from 1729% to 171%, and trended only down.
Anyway, a search of edgar-online 10-Ks gives the following for WMT yearly revenues, with calculated Yearly Increase, Change and Growth Change:
Fiscal Revenue Yearly Growth Year (MM) Increase Change Change ---- ------- -------- ------ ------- 1993 55484 1994 67344 21.4% 1995 82494 22.5% 1.1% 5% 1996 93627 13.5% -9.0% -40% 1997 104859 12.0% -1.5% -11% 1998 117958 12.5% 0.5% 4% 1999 137634 16.7% 4.2% 34%
Note that WMT has been growing its rate of growth for the last two years, though this growth is less than what it had the previous 3 years. The growth rate has been increasing lately, so I will suppose that it will continue to increase at the average of the last two years, or 19% per year. This corresponds to an increase rate of 4% per quarter, so here are the extrapolated data for WMT, next 6 quarters:
b>WMT Growth Rates extrapolated to 3Q01:
Yearly Growth Date Revenue Increase Change Change ---- -------- -------- ------ ------- 1Q97 23007 2Q97 25844 3Q97 26078 4Q97 31249 1Q98 25695 11.7% 2Q98 28704 11.1% -0.6% -5% 3Q98 29127 12.7% 1.6% 14% 4Q98 35773 14.5% 1.8% 14% 1Q99 30157 17.4% 2.9% 20% 2Q99 33880 18.0% 0.6% 3% 3Q99 33924 16.5% -1.5% -8% 4Q99 41247 15.3% -1.2% -7% 1Q00 35123 16.5% 1.2% 8%
2Q00 39707 17.2% 0.7% 4% 3Q00 39996 17.9% 0.7% 4% 4Q00 48919 18.6% 0.7% 4% 1Q01 41902 19.3% 0.7% 4% 2Q01 47688 20.1% 0.8% 4% 3Q01 48355 20.9% 0.8% 4%
The growth rate will likely be something around 21% six quarters from now, or if they turn down immediately, maybe as low as 12%. In any case, this growth looks to be something like 1/3 to 1/2 of what AMZN's growth rate will be at that time. But WMT sells something like $144B per year, and is likely to sell something like $180B (ttm) six quarters from now. AMZN may end up selling something like $2B at that time, and have a growth rate of 35% per year. The ratio in current market caps is about 10 to one, but the ratio in sales is likely to be something like 90 to 1. On a looking forward P/S basis, AMZN is something like 9x over valued compared to WMT. Correcting for AMZN's higher growth rate (at that time) gives maybe 4x. Correcting for WMT's being currently profitable, makes the over valuation back to the double digits region.
It would be much more useful to analysts if AMZN would report their results according to the store. Note that WMT does this, it has three divisions. You can break out the numbers to see where the growth is, if you want to. My guess is that if AMZN broke out book sales, we would be seeing no growth at all, on a consecutive quarter basis, and would be seeing no growth year over year within one year. The reason for my expecting AMZN to begin having these sorts of numbers is that it is clear that its competitors are still growing their businesses at high rates, while AMZN only grew its total sales by 7% 2Q over 1Q. I haven't yet worked out the numbers, this is only what my gut instinct tells me. I will post an analysis to that effect some time in the future.
Here are historical and my extrapolated growth rates for AMZN, calculated seasonally adjusted:
**AMZN Growth Rates 3Q99 &c. extrapolated:**
Yearly Growth Date Revenue Increase Change Lossage ---- -------- -------- ------ ------- Q96 875 2Q96 2230 3Q96 4173 4Q96 8468 1Q97 16005 1729% 2Q97 27855 1150% -579% -33% 3Q97 37887 808% -342% -30% 4Q97 66040 680% -128% -16% 1Q98 87361 446% -234% -34% 2Q98 116044 317% -129% -29% 3Q98 153698 306% -11% -3% 4Q98 252893 283% -23% -8% 1Q99 293643 236% -47% -17% 2Q99 314377 171% -65% -28%
3Q99 356579 132% -39% -23% 4Q99 508314 101% -31% -23% 1Q00 522684 78% -23% -23% 2Q00 503003 60% -18% -23% 3Q00 520605 46% -14% -23% 4Q00 705623 35% -11% -23%
-- Carl |