My love affair with Wal-Mart (WMT) began at the end of August as the stock hovered near eight-year lows as a series of sluggish same-store comparables numbers weighed on the valuation. Shares are up 25% since, in the face of a 10% decline in the S&P 500.

I bring this up after Todd Sullivan suggested that Wal-Mart raising guidance might be something we should get used to. He notes that the stores have momentum all of a sudden, and what combination of “trading down,” positive reactions to the “Save More, Live Better” ad campaign, and strategic changes to merchandising and store layout is irrelevant - after a long run by faux high-end companies, Wal-Mart is reasserting itself as the dominate retailer through old-fashioned tactics like low prices and great selection. Suppliers need to be in Wal-Mart stores, and the company’s enormous scale advantages should continue to provide a very large and defensible economic moat for the foreseeable future.

Even though overall sales growth on the domestic side should continue to run in the low-to-mid single digits, international offers an entirely different story - sales growth there ran close to 20%, according to the most recent release. Currently only one-quarter of sales come from international operations, so there is obviously room to bring that proportion up. I also continue to be impressed by Wal-Mart’s ability to squeeze marginal revenues out of its existing store base; electronics have proved to be an enormously important category of sales growth, and while the margins aren’t great, it brings in customers with money to spend on other goods - something I’d be happy to take.

While I continue to stand by my original fair value target of $58.50 for the time being and will do a fuller reassessment if/when that price is hit, here are a few valuation points to keep watch of:

-EV/EBITDA is reasonable at 8.9x, and earnings multiples in the mid-teens seem fair given Wal-Mart’s growth profile
-There is plenty of room for analysts to raise earnings estimates and price targets to $3.50/share for this year… but doing so would be a fairly quick reversal of the estimate cuts that came in prior months, so it could take some time
-Because the factors in the raised guidance skew more toward secular trends (i.e. better inventory management translating to better margins) as opposed to one-time seasonal factors, I’m going to agree with Todd Sullivan - get used to the raised guidance

I know retail as a whole has put up terrible numbers, but Wal-Mart is the one company that seems to be loving this environment. And until I see evidence to the contrary, I’m sticking with WMT to lead the pack.

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Read more about Wal-Mart (WMT), including my original analysis.