Is anyone else as tired as I am of the market's strongly positive or negative reaction to each and every data point reported by Inside Value selection Wal-Mart (NYSE:WMT)?

Today, the news is that earnings were better than analysts had expected, and the shares are up by close to 3%. A couple of weeks ago, the news was that same-store sales were flat, and the shares swooned. The previous month, same-store sales were strong and Wal-Mart's $4 prescription drug campaign was doing better than expected. As a dyed-in-the-wool value investor, I appreciate the opportunities the volatility creates, but I must admit the overreaction to each and every data point is getting old when the underlying business continues to generate substantial amounts of cash.

The financial results for the quarter were strong, and all the details can be seen in the Fool by Numbers published earlier today. The item I found most impressive was the company's controlled 6.2% inventory growth, while sales growth was nearly double that amount. The sales trends in the company's remaining international businesses are also strong, particularly in Mexico.

From a competitive standpoint, Target (NYSE:TGT) and Costco (NASDAQ:COST) remain Wal-Mart's most competent competitors, and both continue to do well in their own right. Target, for its part, is also following Wal-Mart by offering low-cost generic drugs. Wal-Mart's offering is now available in 27 states, and the company will continue to expand it to the rest of the country.

At the moment, pharmacies such as Walgreens (NYSE:WAG) and CVS (NYSE:CVS) are saying that Wal-Mart's move is having no effect on their businesses and that they don't believe it will. I think these companies are absolutely right that the move to cheaper generic drugs isn't hurting them now, but that they're likely underestimating the long-term potential impact to their margins. Over the last month or so, a couple of pharmacists have emailed me to discuss the details of Wal-Mart's $4 generic drugs. Overall, they're not very impressed, but one confessed he was a bit surprised by a few of the drugs already in Wal-Mart's plan. My guess is that Wal-Mart will gradually expand this plan and that everyone else will gradually have to follow suit. This will take time to play out, but it should be interesting to watch and should give Wal-Mart a boost in traffic.

Wal-Mart continues to be a strong force in retailing, and I don't think that will change any time soon. Eventually the market will come to realize just how much cash flow is flowing through this business and value it accordingly. My best estimate is that the company's valuation is in the ballpark of $60. Given the continued volatility, I think some pretty handsome returns can be earned by investors who pick up shares on the days when there is bad news and hold patiently for a few years.

At the time of publication, Nathan Parmelee owned shares in Costco and had a beneficial interest in shares of Wal-Mart, but had no interest in any of the other companies mentioned. Costco is a Motley Fool Stock Advisor selection. The Motley Fool has an ironclad disclosure policy.