As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Walmart Inc ().
ProfileWalmart serves as the preeminent retailer in the United States, with its strategy predicated on superior operating efficiency and offering the lowest priced goods to consumers to drive robust store traffic and product turnover. Walmart augmented its low-price business strategy by offering a convenient one-stop shopping destination with the opening of its first supercenter in 1988.Today, Walmart operates over 4,600 stores in the United States (5,200 including Sam’s Club) and over 10,000 locations globally. Walmart generated over $440 billion in domestic namesake sales in fiscal 2024, with Sam’s Club contributing another $86 billion to the company’s top line. Internationally, Walmart generated $115 billion in sales. The retailer serves around 240 million customers globally each week.
Recent PerformanceOver the past twelve months the share price is up 70.96%.Source: Google FinanceInputs
Forecasted Free Cash Flows (FCFs)
Terminal ValueTerminal Value = FCF * (1 + g) / (r – g) = 423.28 billionPresent Value of Terminal ValuePV of Terminal Value = Terminal Value / (1 + WACC)^5 = 308.95 billionPresent Value of Free Cash FlowsPresent Value of FCFs = ∑ (FCF / (1 + r)^n) = 85.76 billionEnterprise ValueEnterprise Value = Present Value of FCFs + Present Value of Terminal Value = 394.71 billionNet DebtNet Debt = Total Debt – Total Cash = 51.70 billionEquity ValueEquity Value = Enterprise Value – Net Debt = 343.01 billionPer-Share DCF ValuePer-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $42.69
Conclusion
Based on the DCF valuation, the stock is overvalued. The DCF value of $42.69 per share is lower than the current market price of $90.78. The Margin of Safety is -112.63%.
