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 (WMT).
Profile
Walmart 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 stores 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 Performance
Over the past twelve months the share price is up 44.57%.
Source: Google Finance
Inputs
- Discount Rate: 6%
- Terminal Growth Rate: 1%
- WACC: 6%
Forecasted Free Cash Flows (FCFs)
| Year | FCF (billions) | PV(billions) |
| 2025 | 18.62 | 17.57 |
| 2026 | 19.64 | 17.48 |
| 2027 | 20.72 | 17.40 |
| 2028 | 21.85 | 17.31 |
| 2029 | 23.05 | 17.22 |
Terminal Value
Terminal Value = FCF * (1 + g) / (r – g) = 465.61 billion
Present Value of Terminal Value
PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 347.93 billion
Present Value of Free Cash Flows
Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 86.97 billion
Enterprise Value
Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 434.90 billion
Net Debt
Net Debt = Total Debt – Total Cash = 52.50 billion
Equity Value
Equity Value = Enterprise Value – Net Debt = 382.40 billion
Per-Share DCF Value
Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $47.54
Conclusion
| DCF Value | Current Price | Margin of Safety |
|---|---|---|
| $47.54 | $77.23 | -62.46% |
Based on the DCF valuation, the stock is overvalued. The DCF value of $47.54 share is lower than the current market price of $77.23. The Margin of Safety is -62.46%.
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