Company Overview

Small-Mart originated in 1969 under the leadership of Sam Smallton. Small-Mart is the largest superstore chain in the United States. Small-Mart operates 8,000 stores across three business segments of retail stores worldwide that offer a wide array of general merchandise including groceries, apparel, electronics, and small appliances.

The Company operates in three business segments: Smallmart U.S., International and Sam's Club. During the fiscal year ended January 31, 2010 (fiscal 2010),

The Smallmart U.S. segment accounted for 63.8% of its net sales, and operated retail stores in different formats in the United States, as well as Smallmart's online retail operations, Smallmart.com.

The International segment consists of retail operations in 14 countries and Puerto Rico.During fiscal 2010, the segment generated 24.7% of the Company's net sales. The International segment includes different formats of retail stores and restaurants, including discount stores, supercenters and

Sam's Clubs that operate outside the United States.

The Sam's Club segment consists of membership warehouse clubs in the United States and the segment's online retail operations, samsclub.com. During fiscal 2010, Sam's Club accounted for 11.5% of its net sales.

Database Development Life Cycle Analyzing SmallMart's annual report provides a positive outlook on Small-Mart's financial health.

Given the specific ratios and its comparison to other companies in the same industry, SmallMart is leading and more than likely continue its dominance. Though Small-Mart did not lead in all numbers, its leadership and strong presence of the market cements the ongoing success

| | | | | |

|EXCERPTS FROM SMALL-MART'S 2008,2009 AND 2010 YEARS FINANCIAL STATEMENTS | | | |

| | |Jan 31st |Jan 31st |Jan 31st |

| | |2010 |2009 |2008 |

| | | | | |

|Total Revenue | |$405,046 |$401,244 |$374,526 |

|Cost of Revenue CGS | |$304,657 |$304,056 |$284,137 |

|Gross Profit | |$100,389 |$97,031 |$89,684 |

|Net Income | |$14,335 |$13,400 |$12,731 |

|Net Sales | |$100,389 |$97,188 |$90,389 |

|Dividend Per Share | |$1.09 |$0.95 |$0.88 ||Dividend Per Share | |$1.09 |$0.95 |$0.88 |

|Dividend Payout | |$4,217.00 |$3,746.00 |$3,586.00 |

|No of CommonStock Outstanding| |$3,759,007,514 |$3,915,118,871 |$3,954,458,057 |

|Earning Per Share | |$3.81 |$3.42 |$3.22 |

|Share Price | |$55.91 |$52.82 |$52.68 |

| | | | | |

|Total Inventory | |$33,160 |$34,511 |$35,159 |

L|Total Current Assets | |$48,331 |$48,949 |$48,020 |

|Total Asset | |$170,706 |$163,429 |$163,514 |

|Total Current Liabilities | |$55,561 |$55,390 |$58,478 |

|Total Liabilities | |$99,957 |$98,144 |$98,906 |

|Total Debt | |$41,320 |$42,218 |$44,671 |

|Total Stockholder's Equity | |$73,236 |$67,476 |$66,547 |

|Quick Assets | |$12,051 |$11,180 |$9,223 |

| | | | | |

|Important Ratio Analysis | | | | ||Working Capital |Current assets minus Current liabilities |-$7,230 |-$6,441 |-$10,458 |

|Quick Ratio |A liquidity ratio calculated as (cash plus short-term |0.22 |0.20 |0.16 |

| |marketable investments plus receivables) divided by | | | |

| |current liabilities. | | | |

|Current Ratio |Current assets/Current liabilities |0.87 |0.88 |0.82 |

| | | | | |

|Debt To Equity Ratio |Total Debt/Shareholders' Equity |0.56 |0.63 |0.67 |

|Average Opeating Cycle |Equal to average inventory processing period plus |34.00 |35.00 |38.00 |

| |average receivables collection period. | | | |

|Average Payable Payment |Equal to the number of days in the period divided by |27.00 |26.00 |30.00 |

|Period |payables turnover ratio for the period. | | | |

.|Cash Conversion Cycle |Average Opeating Cycle minus average payables payment |7.00 |9.00 |8.00 |

| |period. | | | |

| | | | | |

|Inventory turnover |(Cost of Goods Sold, (CGS))/Average Inventory |9.19 |8.81 |8.08 |

|Leverage ratio |Avg. Total Assets/ Avg. Total Equity |2.33 |2.42 |2.46 |

|Total asset turnover |Net Sales/Average Total Assets |0.588 |0.595 |0.553 |

|Earning Per Share |Earnings/No. of Outstanding Stocks |3.81 |3.42 |3.22 |

|Stock Price | |55.91 |52.82 |52.68 |

|P/E Ratio |Price/EPS |14.67 |15.44 |16.36 |

| | | | | |

| | | | | |

|Gross profit margin |Gross Profit/Sales, Gross Profit = Sales - CGS |24.78% |24.18% |23.95% |

|Net profit margin |Net Income/Sales |3.54% |3.34% |3.40% |

|ROA | (Net Income)/Average total capital (total capital = |8.40% |8.20% |7.79% |

| |total assets) | | | |

|ROE | Net Income/Average Total Equity |19.57% |19.86% |19.13% |

|Payout Ratio |Dividend/Net Income |29.42% |27.96% |28.17% |

| | | | | |

The review of the current ratio, quick ratio, working capital, inventory turnover ratio, debt to equity ratio, net profit margin ratio, ROI, ROE, and P/E ratio all indicate an upbeat future for the company.

Small-Mart in the year of 2008 had a current ratio of .82, and as of January 2010 it had a current ratio of .86. The current ratio was good however not the best in the industry. I believe the primary reason why it has more current liabilities than it does current assets is because the capital used to buy wholesale products and sell retail are used heavily to keep business booming. Many customers are constantly shopping in Small-Mart, and this need has to be met with enough inventories.

Intrinsic Value using Dividend Discount Models

Buy/Sell Recommendation = Buy

Target WMT Stock Price = $57.00

Risk Free Rate rf = 2.59% (10 Year T Rate)

Expected Market Return Rate E(rm) = 12% (10.19% SP 500 1 year return supporting 12% assumption)

Beta β = 0.36 from Yahoo Finance

Vo = Intrinsic Value of Stock

Do = Dividend 2010 = $1.09

Po = Present Market Value of Stock 10/15/2010 = $53.35

g = Growth Rate

= (Net Income 2010/Net Income 2008)^1/3 -1

=($14335 M / $12731 M)^.33 -1

= 3.99%

Market Capitalization Rate k = rf + β*(E(rm) – rf)

= 2.59 + .36*(12.00 – 2.59)

= 5.97%

Vo = Do*(1+g)/(k-g)

= 1.09*(1+.0399)/(.0597-.0399)

= $57.028

Conclusion

Current Market Price of SMT is $53.35 is underpriced compared to Intrinsic Value of $57.028. At this price, it provides better than a fair rate of return relative to its risk. Using the CAPM terminology it is a positive-alpha stock and investor will want to buy or invest in company’s stock.

Small-Mart's stellar performance has created optimism for those invested in Small-Mart whether it be a shareholder, bondholder, employee, management, and as a consumer. I believe Small-Mart is a great buy. The current economic conditions in America especially, Small-Mart might suffer because consumers in America will be less inclined to spend as much money.

References

Bibliography

http://seekingalpha.com/article/39656-Small-mart-dividend-yield-atall-time-high-p-e-at-all-time-low

finance.yahoo.com

http://moneycentral.msn.com/investor/invsub/results/compare.asp? symbol=tgt http://moneycentral.msn.com/investor/invsub/results/compare.asp? symbol=tgt

google.com

http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeState ment.jsp?tkr=tgt&period=qtr

Forbes.com

Works Cited

EEOC. (n.d.). The US Equal Employment Opportunity Commission. Retrieved June 2, 2009, from Sexual Harrassment: http://www.eeoc.gov/types/sexual_harassment.html

EEOC. (2006, June 1). Smallmart to Pay $315,000 to Settle Two Suits for Sexual Harassment. Retrieved June 11, 2009, from The US Equal Employment Opportunity Commission: http://www.eeoc.gov/press/6-01-06.html

Ferrell, O., Fraedrich, J., & Ferrell, L. (2008). Business Ethics: Ethical Decision Making and Cases (Seventh Edition ed.). Mason: South-Western.