Walmart Inc. (WMT) Stock Analysis

Walmart Inc. (WMT) Stock Analysis

Sector: Consumer Defensive / Retail
Industry: Discount Stores
Analysis Date: February 20, 2025

1. Company Overview

Walmart Inc. (NYSE: WMT) is the world’s largest retailer by revenue, operating a vast chain of hypermarkets, discount department stores, and grocery stores. With a significant global footprint, Walmart serves millions of customers weekly through both brick-and-mortar locations and an expanding e-commerce platform.

Strategic Highlights:

  • Omnichannel Retail Focus: Walmart is heavily investing in e-commerce and digital integration to compete with online-focused retailers.
  • Everyday Low Price Model: The company’s cost leadership and scale advantage underpin its competitive position.
  • Global Presence: While the majority of revenue comes from the U.S., Walmart also has international operations in markets like Mexico, Canada, and China.

2. Financial Performance

a. Revenue & Growth

  • TTM Revenue: $680.99 Billion
  • Revenue Growth (YoY): +5.07%

Analysis:
Walmart’s revenue is driven by its massive store footprint, grocery dominance, and online sales. Growth near ~5% yoy reflects stable consumer demand and continuing store/e-commerce integration.

b. Profitability

  • TTM Net Income: $19.44 Billion
  • EPS (TTM): $2.41
  • Profit Margin: 2.85%

Analysis:
Walmart maintains thin net margins typical of high-volume, low-margin retail. Net income yoy rose by ~25%, suggesting operational improvements and steady consumer demand. Despite intense competition, Walmart’s scale supports consistent profitability.

c. Margins

  • Gross Margin: 24.85%
  • Operating Margin: 4.31%
  • EBITDA Margin: 6.21%

Analysis:
Gross margin remains moderate (~25%) given Walmart’s low-price model. Operating margin (4.31%) is stable for discount retail, aided by strong cost controls and high inventory turnover.

d. Free Cash Flow

  • Operating Cash Flow (TTM): $36.44 Billion
  • Capital Expenditures (TTM): -$23.78 Billion
  • Free Cash Flow (TTM): $12.66 Billion
  • FCF Margin: ~1.86%

Analysis:
Walmart generates substantial operating cash flow, though heavy capex for store remodels, e-commerce, and supply chain investments limit FCF margin (~1.9%). Still, $12.66B in free cash flow is significant for fueling dividends and buybacks.

3. Balance Sheet & Liquidity

  • Cash & Equivalents: $9.04 Billion
  • Total Debt: $60.11 Billion
  • Net Cash (Debt): -$51.08 Billion
  • Equity (Book Value): $97.69 Billion

Analysis:
Walmart carries a sizable debt load (~$60B) but also robust cash flows to service it. Net debt of -$51B equates to roughly -$6.36 per share. The company’s scale and stable business model help maintain manageable leverage.

4. Valuation

  • P/E (TTM): 40.34
  • Forward P/E: 35.79
  • P/S (TTM): 1.15
  • EV/EBITDA (TTM): 19.66
  • P/FCF (TTM): 61.68

Analysis:
Walmart trades at a premium multiple, reflecting market confidence in its defensive retail position, e-commerce initiatives, and consistent performance. The forward P/E (~36) indicates expectations of continued moderate growth.

5. Market Performance

  • 52-Week Price Change: +71.18%
  • Beta (5Y): 0.55

Analysis:
Walmart’s shares have surged ~71% yoy, significantly outpacing broader retail peers. A low beta (0.55) suggests the stock experiences less volatility than the market, consistent with Walmart’s defensive profile.

6. Dividend & Shareholder Returns

  • Annual Dividend: $0.83 (Yield ~0.85%)
  • Payout Ratio: ~34.44%
  • Buyback Yield: ~0.33%

Analysis:
Walmart has a long history of dividend increases (52 years of growth). The current yield (~0.85%) is modest, but consistent dividend hikes plus share repurchases reflect management’s commitment to returning capital to shareholders.

7. Risks & Considerations

1.  Low-Margin Retail Environment: Walmart’s margins are sensitive to cost inflation, wage pressures, and competitive pricing.

2.  Competition & E-Commerce: Despite Walmart’s strong e-commerce push, it competes with Amazon and other online retailers.

3.  Inventory & Supply Chain: Effective inventory management is crucial; disruptions can impact margins and stock levels.

4.  Global Economic & Currency Risks: With international operations, currency fluctuations and regional slowdowns can affect results.

5.  Regulatory & ESG Pressures: As a large employer and retailer, Walmart faces scrutiny over labor practices, environmental impact, and regulatory compliance.

8. Conclusion

Pros:

  • Scale & Brand Dominance: Walmart’s unmatched store footprint and brand recognition drive consistent traffic.
  • Steady Dividend & Buybacks: Over 50 years of dividend increases plus ongoing share repurchases.
  • Omnichannel Strategy: E-commerce expansion and grocery leadership support resilience in shifting retail dynamics.

Cons:

  • Premium Valuation: P/E ~40 and EV/EBITDA ~20 reflect high expectations for stable growth.
  • High Competition: Intense competition from both traditional retailers and online giants.
  • Low Margins: Typical for large-scale discount retail; operational missteps or cost inflation can compress margins quickly.

Final Note:
Walmart offers a blend of defensive retail stability, scale advantages, and consistent shareholder returns via dividends and buybacks. While the stock’s valuation is elevated, reflecting investor confidence, Walmart’s scale and operational efficiencies provide a durable moat. Prospective investors should weigh the premium multiples against Walmart’s historically resilient business model, robust cash flows, and ongoing e-commerce transformation.

Disclaimer:
This analysis is for informational purposes and does not constitute investment advice. Investing involves risks, including possible loss of principal. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions.

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