Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores from the United States, headquartered in Bentonville, Arkansas. As of 1/31/21, Walmart Inc. owns the world’s largest retail chain, operating 3,570 supercenters (includes grocery departments), 374 discount stores, 599 Sam’s Clubs, and 799 Neighborhood Markets in the U.S., plus 6,101 foreign stores, many in Latin America, with the rest in Asia, Canada, and the U.K. This week, I fundamentally analyze Walmart’s stock. I review WMT’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account Walmart’s 2021 free cash flow of $25,810 million figure, a 6% growth rate of FCF (growth for the next 10 years), 10% discount rate, 4% long term growth rate (growth from 10 year mark to perpetuity), 2,833 million shares outstanding, and $41,194 million of long term debt, the DCF analysis yields us an intrinsic value of $165.26 per share. Using the current stock price of about $149.25 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 8.0% if we hold this security through 2060.
Timestamp
0:00 Introduction
0:51 Business Overview
4:51 Key Ratios Analysis
15:14 Discounted Cash Flow Analysis / Intrinsic Value
17:09 Expected Rate of Return Calculation
18:13 Summary / Conclusion
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References:
Walmart’s Website: here.
Morningstar Key Ratios Link: here.
Useful Resources here.
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