Wal-Mart Pullback Giving The Bulls A Chance To Reload

Wal-Mart Stores, Inc. WMT shares had a magnificent run to the upside in late 2014 and into early 2015 when they ran from the low $70s to the recent peak at $90.97. That type of move in Wal-Mart has become a rarity in recent years.

However, with the consolidation/pullback the shares have seen in recent weeks, should investors and traders be looking for yet another upside push? Do the fundamentals of the company justify this type of bullish action? Let's take a look at the Wal-Mart picture in more detail.

What The Bulls See

• Attractive valuation metrics: An enterprise value of $307 billion that far exceeds the market capitalization of $266 billion and a price-to-sales ratio of 0.54.
• 3.37 percent net margins that spin off a massive $13.5 billion in annual positive levered free cash flow.
• Good management effectiveness measures: Return on assets of 8.31 percent and a return on equity of 19.93 percent.
• A nice, Treasury-beating 2.4 percent dividend yield.

What The Bears See

• Some rich valuation metrics: A price-to-book ratio of 3.23 and a forward PE ratio of around 16 versus estimated revenue and EPS growth for next year of 3.1 percent and 5.5 percent, respectively.
• A bit of a debt-heavy balance sheet: Cash of $9.14 billion versus debt of $50.38 billion, a current ratio of 0.97 and a debt-to-equity ratio of 58.63 percent.

The Technical Take

Technicians note that Wal-Mart stock has been pulling back nicely after a power move to the upside in previous months. By pulling back "nicely," they mean that the overall technical pattern for Wal-Mart is bullish, but that this short-term downside correction needed to play out to alleviate some of the overbought condition that had built up.

Right now, important horizontal line support comes in at $81.01. The bulls will definitely be looking to make a stand there. Resistance for Wal-Mart shares comes in at the recent high at $90.97 and is backed up by the proverbial resistance "at par" or $100.

Overall…

Wal-Mart will be an attractive long-side candidate for technical traders as long as the $81.01 support holds up. Many value players are already long of this stock; many others may be re-entering after taking profits recently at $90.