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Two things wrong with Walmart

Forget about the People of Walmart (WMT), the website that shows some, er, unflattering photos of people shopping at the store. The most painful sight for investors is the stock.

Shares of the nation's biggest retailer are down 19.1% this year — including a 3.4% drop to $69.48 Tuesday after the company reported a disappointing adjusted profit a share of $1.08. That missed expectations by 3.6%.

But missing earnings forecasts for the second quarter in a row isn't the true problem facing the retailer — at least not in the eyes of investors. Instead, there are two troubling financial developments at the company that investors are keying on:

* Declining return on equity. Investors looking for a scorecard on management fixate on return on equity. The measure shows how much profit the company is driving from the money plowed into the...


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