Walmart Inc (WMT, Financial) has recently experienced a daily loss of 8.09%, alongside a slight 3-month decline of 1.91%. Despite these short-term fluctuations, the company maintains an Earnings Per Share (EPS) of 5.2. Investors and analysts alike are keen to understand whether this retail giant is trading at a fair market value. To address this inquiry, we dive into a comprehensive valuation analysis, inviting readers to explore the financial nuances of Walmart's stock.
Company Introduction
Walmart Inc (WMT, Financial) stands as a dominant force in the United States retail sector, renowned for its operational efficiency and commitment to providing consumers with the lowest priced goods. This strategy has not only fostered significant store traffic but also ensured rapid product turnover. Walmart's historical journey began with the launch of its first supercenter in 1988, leading to its current expansive network of over 4,700 stores in the U.S., and more than 10,000 worldwide. With a hefty $420 billion in domestic sales and a substantial global customer base of approximately 240 million, Walmart's financial footprint is impressive. The company's market cap stands at $420 billion, with sales reaching $630.80 billion. When considering the stock's current price of $156.04 against the GF Value of $164.11, a key question arises: Is Walmart fairly valued?
Summarize GF Value
The GF Value is an exclusive metric that calculates the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance and growth, and future business performance predictions. The GF Value Line indicates the ideal fair trading value for a stock. For Walmart (WMT, Financial), the GF Value suggests that the stock is fairly valued. This indicates that Walmart's stock price is expected to perform in line with the company's business growth rate over the long term.
Financial Strength
An essential aspect of stock analysis is the assessment of a company's financial strength. Walmart's cash-to-debt ratio stands at 0.21, positioning it lower than 66.56% of its peers in the Retail - Defensive industry. However, with a financial strength rating of 7 out of 10, the company's overall fiscal health is deemed fair.
Profitability and Growth
Walmart's consistent profitability over the past decade underscores its resilience as an investment. With a 10-year track record of profits, a revenue of $630.80 billion, and an operating margin of 3.46%, Walmart's profitability is commendable. The company's growth is also noteworthy, with an average annual revenue increase of 7%, surpassing 59.03% of its industry counterparts. However, its 3-year average EBITDA growth rate of -2.2% lags behind 78.6% of its peers.
ROIC vs WACC
Evaluating a company's ROIC against its WACC provides insights into its profitability relative to the cost of capital. Walmart's ROIC of 8.22% over the past 12 months slightly exceeds its WACC of 7.75%, indicating value creation for shareholders.
Conclusion
In conclusion, Walmart (WMT, Financial) is estimated to be fairly valued. The company exhibits fair financial condition and profitability, although its growth could be more robust compared to industry standards. For a more detailed financial perspective on Walmart, investors can explore the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
