Walmart Inc (WMT, Financial) experienced a 4.37% loss on October 6, 2023, marking a 1.76% decrease over the past three months. With an Earnings Per Share (EPS) (EPS) of 5.2, the question arises: Is the stock fairly valued? This article aims to answer this question by providing an in-depth analysis of Walmart's valuation. Let's delve into the details.
As the leading retailer in the United States, Walmart's strategy is built on superior operational efficiency and offering the lowest priced goods to consumers, driving robust store traffic and product turnover. Since opening its first supercenter in 1988, Walmart has grown to operate over 4,700 stores in the United States (5,300 including Sam's Club) and over 10,000 stores globally. With a market cap of $409.50 billion, the company serves around 240 million customers worldwide.
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides a snapshot of the fair value at which the stock should ideally be traded.
At its current price of $152.13 per share, Walmart is believed to be fairly valued. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy its stock. Walmart has a cash-to-debt ratio of 0.21, which is worse than 65.25% of 305 companies in the Retail - Defensive industry. However, Walmart's overall financial strength ranks 7 out of 10, indicating fair financial stability.
Investing in profitable companies, especially those with consistent profitability over the long term, typically carries less risk. Walmart has been profitable for the past 10 years. Over the past twelve months, the company had a revenue of $630.80 billion and an EPS of $5.2. Its operating margin of 3.46% ranks better than 53.38% of 311 companies in the Retail - Defensive industry, indicating fair profitability.
However, growth is a critical factor in the valuation of a company. Walmart's 3-year average annual revenue growth rate is 7%, which ranks better than 57.64% of 288 companies in the Retail - Defensive industry. But its 3-year average EBITDA growth rate is -2.2%, which ranks worse than 78.21% of 257 companies in the same industry, indicating below-average growth.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insight into its profitability. Over the past 12 months, Walmart's ROIC was 8.22, while its WACC came in at 8.01, indicating that the company is creating value for shareholders.
Overall, Walmart's stock is believed to be fairly valued. The company's financial condition is fair, and its profitability is also fair. However, its growth ranks below 78.21% of 257 companies in the Retail - Defensive industry. To learn more about Walmart's stock, you can check out its 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.