Walmart Inc (WMT, Financial) recently showed a notable daily gain of 7.02%, contributing to a 3-month gain of 6.75%. With an Earnings Per Share (EPS) of 1.91, investors are keen to understand if the stock is modestly overvalued. This article delves into Walmart's valuation, providing a detailed analysis to guide investment decisions.
Company Overview
As a leading retailer in the United States, Walmart Inc (WMT, Financial) has consistently focused on superior operational efficiency and competitive pricing to drive significant store traffic and product turnover. From its humble beginnings, Walmart has expanded to operate over 4,600 stores in the U.S. and more than 10,000 globally. In fiscal 2024 alone, Walmart generated over $440 billion in domestic sales and an additional $115 billion internationally. The company's strategy of offering a convenient one-stop shopping experience started with the opening of its first supercenter in 1988, a move that has solidified its market leadership.
Understanding the GF Value
The GF Value is a proprietary measure indicating the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Walmart, the GF Value suggests the stock is currently trading above its fair value, indicating it is modestly overvalued. This assessment aligns with the stock's current price of $64.03 and a market cap of $516.10 billion, suggesting potential lower future returns relative to business growth.
Financial Strength and Stability
Assessing a company's financial health is crucial to understanding its investment potential. Walmart's cash-to-debt ratio stands at 0.16, ranking lower than 71.66% of its peers in the Retail - Defensive industry. This metric, along with an interest coverage ratio, provides insights into the company's ability to manage debt responsibly. Despite these figures, Walmart's overall financial strength is rated 7 out of 10, indicating a relatively stable financial position.
Profitability and Growth Perspectives
Walmart has maintained profitability over the past decade, showcasing robust revenue figures of $648.10 billion in the last 12 months alone. The company's operating margin stands at 4.17%, which is competitive within the industry. Additionally, Walmart's 3-year average annual revenue growth rate is 6.9%, reflecting steady business expansion despite market fluctuations.
Moreover, evaluating Walmart's efficiency in generating returns on invested capital (ROIC) relative to its cost of capital (WACC) reveals that the company effectively creates value for its shareholders. The current ROIC is 11.13, surpassing the WACC of 7.31.
Conclusion
In summary, while Walmart (WMT, Financial) is estimated to be modestly overvalued, its financial condition remains stable, and its profitability is strong. The company's growth, though not leading the industry, is consistent. For a deeper dive into Walmart's financials and to explore potential investment opportunities, consider visiting Walmart's 30-Year Financials.
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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.
