And yet, the total return graph provided by Walmart, in it’s annual report, shows the company trailing both the S&P 500 and retail indexes. How badly would the company underperform it’s sector, without that financial manipulation?
At the beginning of June 2018 WMT traded at $83.04 and yesterday it closed at $151.47, up 82% (not counting dividends).
At the beginning of June 2018 SPY traded at $272.41 and yesterday it closed at $419.23, up 53% (not counting dividends).
Do you have different prices?
I have no idea what you are trying to communicate with the above.
Regardless, if you are holding share buybacks against Walmart as a means to undercut its stock performance compared to the S&P, then you ALSO have to hold it against the S&P as much of its performance would also be due to such. Heck, much of the S&P performance is due to just a handful of companies and one them (AAPL) is the poster child for stock buybacks:
That is what I was getting at. Has anyone quantified how much of the performance of the S&P is successful execution of the business, vs how much is due to financial manipulation?
I have not followed AAPL, but I see you are right. Equity has fallen, between 2019 and 2022, from $90B to $50B. Burning equity at that rate, $10B/year, AAPL will be effectively liquidated in another five years. If I was really interested, I should see if I could find a spreadsheet of AAPL equity, by year, going back to Jobs’ death, to see when the company shifted from basing it’s success on innovation, to financial manipulation.
@steve203 I suspect that you are looking at this particular isolated statistic in the wrong way. I am not an accountant so I can’t put my finger on it exactly, but my intuition says “wrong” for two reasons:
Let’s look at Apple for example. You say “shareholder equity” is dropping and it’s a bad thing. But, what about the fact that the company returned nearly $500B in earned cash to the shareholders over that period. Why should anyone care that shareholder equity on a balance sheet may have gone down by $10 or $30 billion over the ten or fifteen years if the shareholders received nearly $500B in cash?
Companies are funded via equity, via debt, and via retained earnings. They issue equity when advantageous. They issue debt when advantageous. And they do various things with their earnings. But why would anyone claim that equity (“number of shares”) should only go up, and that whatever number of shares are currently outstanding is the “perfect” number and should never be reduced? What if debt is really really cheap at some point and makes it advantageous* to use debt instead of equity for a period of time? Or if a company generates so much cash, it may not need to use debt or equity for a period of time, it can self fund. Can you imagine if people treated debt the same way, you’d be claiming that any company that aggressively retired debt was only doing so to show better results (lower interest expense) so their execs can receive big bonuses.
* Using Apple as an example again. A few years ago, Apple found it very advantageous to issue some debt (because the rates they could get were absurdly low) and use the money to buy their equity. Turns out that the interest on that debt was less than the dividends on those shares, so on a period-over-period basis, it was almost cash flow positive!