With a daily gain of 1.39%, a 3-month gain of 13.19%, and an Earnings Per Share (EPS) of $1.91, investors are keen to understand if Walmart Inc (WMT, Financial) is currently fairly valued. The stock's performance and earnings are critical indicators of its health, but the question remains: does the current stock price reflect Walmart's true worth? The following analysis delves into Walmart's valuation to provide an answer.
Company Introduction
Walmart Inc (WMT, Financial) stands as a leading retailer in the United States, renowned for its operational efficiency and strategy of offering the lowest priced goods. The company's history of driving high store traffic and product turnover began with the opening of its first supercenter in 1988. Today, Walmart operates over 4,600 stores domestically and more than 10,000 stores globally. With over $440 billion in domestic sales and an additional $86 billion from Sam's Club in fiscal 2024, plus $115 billion internationally, Walmart serves approximately 240 million customers worldwide each week. When compared to the GF Value of $55.25, Walmart's current stock price of $60.62 suggests a close alignment with its estimated fair value.
Summarize GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance forecasts. If a stock's price significantly exceeds the GF Value Line, it may be overvalued, potentially leading to poor future returns. Conversely, a price well below the GF Value Line could indicate undervaluation and the prospect of higher future returns. Walmart's stock is currently deemed fairly valued, suggesting that its long-term return may closely track the company's business growth rate.
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Financial Strength
Assessing a company's financial strength is crucial before investing in its stock. Companies with weak financial health pose a higher risk of permanent loss. Walmart's cash-to-debt ratio of 0.16 is lower than 72.49% of its peers in the Retail - Defensive industry, indicating fair financial strength with a rating of 7 out of 10.
Profitability and Growth
Investing in profitable companies, particularly those with a history of consistent profitability, tends to be less risky. Walmart has maintained profitability for the past decade, with a strong operating margin of 4.17%, ranking it better than 61.02% of its industry competitors. The company's profitability rank is a robust 8 out of 10. Additionally, growth is a pivotal valuation factor, and Walmart's 3-year average revenue growth rate surpasses 95.58% of its industry peers, with a 3-year average EBITDA growth rate of 50.1%, ranking higher than 91.98% of the companies in the Retail - Defensive industry.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides insight into a company's profitability relative to the capital invested. When ROIC exceeds WACC, it indicates value creation for shareholders. Walmart's ROIC is 11.13, outperforming its WACC of 7.29, signaling effective capital use.
Conclusion
Overall, Walmart (WMT, Financial) is estimated to be fairly valued. The company's financial condition is sound, and its profitability is robust. Its growth outperforms a significant majority of companies in the Retail - Defensive industry. For a deeper dive into Walmart's financials, you can explore 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.
