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Strategies & Market Trends : Value Investing
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To: FIFO_kid2 who wrote (62975)12/17/2019 2:52:07 PM
From: bruwin1 Recommendation

Recommended By
Lance Bredvold

  Read Replies (3) of 78774
 
Here's the thing about many of the retail stores who are, obviously, in competition with others in that sector ....

Due to the Highly Competitive nature of their business, where PRICE OF PRODUCT IS ONE OF THE PRIMARY CONSIDERATIONS FOR THE CUSTOMER/CONSUMER, their MARGINS ARE THEREFORE VERY LOW.

Here are 5 examples from within the top 20 in terms of their EBITDA and NET INCOME(NI) MARGINS as per their TTM numbers :-

Walmart (WMT) :- EBITDA = 4.2%. NI = 2.8%
Kroger (KR) :- EBITDA = 3.9%. NI = 1.3%
Costco (COST) :- EBITDA = 3.2%. NI = 2.4%
Best Buy (BBY) :- EBITDA = 4.8%. NI = 3.5%
CVS Corp (CVS) :- EBITDA = 4.8%. NI = 1.9%

So you have these massive organizations, working their butts off, for minimal returns of between only 1.3% to 3.5%.

If one thinks about it, that doesn't leave much "room for error" should anything negative occur for the company.
Because if NI goes Negative that reduces the value of their Balance Sheet if no share capital has been pumped into the business.

Seems to me that there are far better, less "bottom line" risky investment options out there in the stock market .....
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