Loading...

Wal-Mart Stores

NYSE:WMT
Snowflake Description

Established dividend payer with adequate balance sheet.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
WMT
NYSE
$232B
Market Cap
Hypermarkets and Super Centers
Company description

Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. More info.


Add to Portfolio Compare Print Invest
SHARE PRICE
3 Month History
WMT
Industry
5yr Volatility vs Market

Value

 Is Wal-Mart Stores undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Wal-Mart Stores to its discounted cash flow value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Wal-Mart Stores is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avacados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Wal-Mart Stores's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Wal-Mart Stores's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Good value based on earnings compared to the Food and Staples Retailing industry average.
  • Good value based on earnings compared to the overall market.
Price based on expected Growth
Does Wal-Mart Stores's expected growth come at a high price?
  • No forecast or negative expected growth next year.
Price based on value of assets
What value do investors place on Wal-Mart Stores's assets?
  • Good value based on assets compared to the Food and Staples Retailing industry average.
X
Value checks
We assess Wal-Mart Stores's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
  2. Is the PE ratio less than the market average, and/ or less than the Food and Staples Retailing industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Food and Staples Retailing industry average (and greater than 0)? (1 check)
  5. Wal-Mart Stores has a total score of 3/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (-0.3%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (Free cash flow to Equity)

The calculations below outline how an intrinsic value for Wal-Mart Stores is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$58,071

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $14,646 × (1 + 2.3%) ÷ (8.47% – 2.3%)

Terminal value based on the Perpetuity Method where growth (g) = 2.3%:
$244,246

Present value of terminal value:
$162,689

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value

Value = Total value / Shares Outstanding ($220,760 / 2,952)

Value per share:
$74.79

Current discount (share price of $78.52): -5%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.47% = 2.33% + (0.8 * 7.67%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.731 = 0.64 (1 + (1- 30%) (20.32%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 2.33% is from the 10 year government bond rate in US.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Wal-Mart Stores expected to perform in the next 1 to 3 years based on estimates from 20 analysts?

    The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

    Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
    3 year growth
    15%
    Expected earnings growth over 3 years.
    Future Earnings growth analysis
    Is Wal-Mart Stores expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.

    Are Wal-Mart Stores's annual earnings growth expected to exceed 3.4% over the next 3 years?

    • Earnings are expected to decrease over the next year.
    • After 3 years
    1 & 3 year estimated growth in earnings
    Past and Future Earnings per Share
    The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
    Analysts growth expectations
    2 year growth check
    Super high growth metrics x1.5?

    Which of the these is expected to increase by over 50% in 2 year's time?

    • Revenue
    • Cash flow
    • Profit
    Performance in 3 years
    In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
    • Wal-Mart Stores is not expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be below 20%.

    Improvement & Relative to industry
    • Expected to be less than the Food and Staples Retailing industry average.
    • An improvement in Wal-Mart Stores's performance (ROE) is expected over the next 3 years.
    X
    Future performance checks
    We assess Wal-Mart Stores's future performance by looking at:
    1. Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
    2. Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
    3. Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
    4. Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
    5. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
    Some of the above checks will fail if the company is expected to be loss making in the relevant year.
    Wal-Mart Stores has a total score of 1/6, see the detailed checks below.

    Note: If no +3 year data is available, +2.5 year data may be used.

    Note 2: We use GAAP per Share in all our calculations.

    Full details on the Future part of the Simply Wall St company analysis model.

    Past Performance

     How has Wal-Mart Stores performed over the past 5 years?

    The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
    Past earnings growth
    Below we compare Wal-Mart Stores's growth in the last year to its industry (Food and Staples Retailing).
    Past Earnings growth analysis
    We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
    • Wal-Mart Stores's earnings growth has not matched the industry average in the past year.
    • Wal-Mart Stores's 1 year earnings growth is negative.
    • Wal-Mart Stores earnings have fallen over the past 5 years.
    Profit History
    Wal-Mart Stores's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
    Performance last year
    We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
    • Poor return on shareholders funds (ROE) last year.
    • Wal-Mart Stores performed above the Food and Staples Retailing industry average based on return on assets (ROA) last year.
    • Performance based on revenue producing assets (ROCE) has been diminishing over 3 years.
    X
    Past performance checks
    We assess Wal-Mart Stores's performance over the past 5 years by checking for:
    1. Has earnings per share (EPS) increased in past 5 years? (1 check)
    2. Has the EPS growth in the last year exceeded that of the Food and Staples Retailing industry? (1 check)
    3. Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
    4. Is the Return on Equity (ROE) higher than 20%? (1 check)
    5. Is the Return on Assets (ROA) above industry average? (1 check)
    6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
    The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
    Wal-Mart Stores has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations.

    Full details on the Past part of the Simply Wall St company analysis model.

    Health

     How is Wal-Mart Stores's financial health and their level of debt?

    A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

    The boxes below represent the relative size of what makes up Wal-Mart Stores's finances.

    The net worth of a company is the difference between its assets and liabilities.
    Net Worth
    • Wal-Mart Stores short term (1 year) commitments are greater than its holdings of cash and other short term assets.
    • Wal-Mart Stores's cash and other short term assets cover its long term commitments.
    Balance sheet
    This treemap shows a more detailed breakdown of Wal-Mart Stores's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
    Assets
    Liabilities and shares
    The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
    • High level of stock/ inventory/ unsold assets.
    • Total debt is covered by short term assets.
    Historical Debt
    Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

    The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

    If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
    • The level of debt (62%) compared to net worth is high (greater 40%).
    • The level of debt compared to net worth has been reduced over the past 5 years (74% vs 62% today).
    • Total debt is well covered by annual operating cash flow (greater than 20% of total debt).
    • Interest on debt is well covered by earnings (10x coverage).
    X
    Financial health checks
    We assess Wal-Mart Stores's financial health by checking for:
    1. Are short term assets greater than short term liabilities? (1 check)
    2. Are short term assets greater than long term liabilities? (1 check)
    3. Has the debt to equity ratio increased in the past 5 years? (1 check)
    4. Is the debt to equity ratio over 40%? (1 check)
    5. Is the debt covered by short term assets? (1 check)
    6. Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
    7. Wal-Mart Stores has a total score of 4/6, see the detailed checks below.


    Full details on the Health part of the Simply Wall St company analysis model.

    Dividends

     What is Wal-Mart Stores's current dividend yield, its reliability and sustainability?

    Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
    Annual Dividend Income
    Dividend payments
    2.67%
    Current annual income from Wal-Mart Stores dividends. Estimated to be 2.87% next year.
    If you bought $2,000 of Wal-Mart Stores shares you are expected to receive $53 in your first year as a dividend.
    Dividend Amount
    Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
    • Paying above low risk savings rate. (2.25%)
    • Paying below the markets top dividend payers. (3.18%)
    Upcoming dividend payment

    Purchase Wal-Mart Stores on or before the 'Buy Limit' to receive their next dividend payment.

    Dividends are usually paid every 3 or 6 months, you can time your share purchase to take advantage of upcoming dividend payments.
    Dividend payment calendar
    Historical dividend yield
    It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

    We also check to see if the dividend has increased in the past 10 years.
    • Dividends per share have been stable in the past 10 years.
    • Dividends per share have increased over the past 10 years.
    Current Payout to shareholders
    What portion of Wal-Mart Stores's earnings are paid to the shareholders as a dividend.
    • Dividends paid are well covered by net profit (2.2x coverage).
    Future Payout to shareholders
    • Dividends after 3 years are expected to be well covered by net profit (2x coverage).
    X
    Income/ dividend checks
    We assess Wal-Mart Stores's dividend by checking for:
    1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
    2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
    3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
    4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
    5. How sustainable is the dividend, can Wal-Mart Stores afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
    6. Wal-Mart Stores has a total score of 5/6, see the detailed checks below.


    Full details on the Dividends part of the Simply Wall St company analysis model.

    Management

     What is the CEO of Wal-Mart Stores's salary, the management and board of directors tenure and is there insider trading?

    Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
    CEO
    Doug McMillon, image provided by Google.
    Doug McMillon
    COMPENSATION$22,352,143
    AGE51
    CEO Bio

    Mr. C. Douglas McMillon, also known as Doug, has been the Chief Executive Officer and President of Wal-Mart Stores, Inc since February 1,2014. Mr. McMillon served as the President and Chief Executive Officer of Wal-Mart International Operations at Wal-Mart Stores from February 1, 2009 to January 2014. He served as an Executive Vice President of Wal-Mart Stores Inc. since August 4, 2005. He served as the Chief Executive Officer of Sam's Club Discount Warehouse Stores Operations from August 4, 2005 to February 1, 2009. He served as the Chief Executive Officer and President of SAM'S West, Inc., (alternate name Sam's Club) from August 4, 2005 to January 2009. He was responsible for the overall corporate strategy and direction of Sam's Club. Mr. McMillon served as an Executive Vice President of Merchandising and Replenishment of Sam's Club of Wal Mart Stores Inc. until August 2005. He worked two consecutive summers as an Associate at the Wal-Mart Distribution Centers in Northwest Arkansas. He served as a Buyer Trainee for Wal-Mart working in Store #894 in Tulsa, OK. Mr. McMillon served as a Buyer for Food and Candy, Ladieswear and Crafts, a Divisional Merchandise Manager for Home Furnishings and Infants and Toddlers, Vice President and General Merchandise Manager at Sam’s Club International and Senior Vice President and General Merchandise Manager at Wal-Mart Stores Inc., where he oversaw purchases for Toys, Electronics, Video Games, Photo, Sporting Goods, Stationary and Office Supplies. He serves as a Director of National Chapter of Students in Free Enterprise (SIFE). He has been a Director of Wal-Mart Stores Inc. since November 25, 2013. He serves as of Director of US-China Business Council, Inc. He serves on the Executive Board of Directors of Center of Retailing Excellence at the University of Arkansas and on the Corporate Board of Advisors for National Council at La Raza. He has been a Director of Wal-Mart Stores Inc. since November 25, 2013. He served as Director of Massmart Holdings Limited from June 20, 2011 to August 20, 2012. He served as a Director of Wal-Mart de Mexico SAB De CV since 2009. He has been recognized as a Young Global Leader by the World Economic Forum. Mr. McMillon graduated from the University of Arkansas in Fayetteville, with a Bachelor of Science in Business Administration (BSBA) in Accounting. Mr. McMillon received an M.B.A. in Finance from the University of Tulsa.wal

    CEO Compensation
    • CEO's compensation has been consistent with company performance over the past year.
    • CEO's compensation appears reasonable.
    Management Team Tenure

    Average tenure of the Wal-Mart Stores management team:

    Management tenure
    2 years
    • The tenure for the Wal-Mart Stores management team is about average.
    Management Team

    Doug McMillon

    TITLE
    Chief Executive Officer
    COMPENSATION
    $22,352,143
    AGE
    51

    Brett Biggs

    TITLE
    Chief Financial Officer and Executive Vice President
    COMPENSATION
    $6,409,160
    AGE
    49

    Dave Cheesewright

    TITLE
    Executive VP
    COMPENSATION
    $12,552,574
    AGE
    55

    Greg Foran

    TITLE
    Executive Vice President
    COMPENSATION
    $11,553,853
    AGE
    56

    Marc Lore

    TITLE
    Executive VP
    COMPENSATION
    $243,876,539
    AGE
    45

    David Chojnowski

    TITLE
    Principal Accounting Officer
    AGE
    47
    Board of Directors Tenure

    Average tenure of the Wal-Mart Stores board of directors:

    Board tenure
    6 years
    • The tenure for the Wal-Mart Stores board of directors is about average.
    Board of Directors

    Greg Penner

    TITLE
    Chairman
    COMPENSATION
    $468,976
    AGE
    48

    Doug McMillon

    TITLE
    Chief Executive Officer
    COMPENSATION
    $22,352,143
    AGE
    51

    Enrique Ostalé Cambiaso

    TITLE
    EVP, Chairman of the Board
    AGE
    57

    Jim Cash

    TITLE
    Lead Independent Director
    COMPENSATION
    $363,915
    AGE
    69

    Steve Reinemund

    TITLE
    Independent Director
    COMPENSATION
    $289,787
    AGE
    69

    Tim Flynn

    TITLE
    Independent Director
    COMPENSATION
    $384,364
    AGE
    60
    Recent Insider Trading
    • Wal-Mart Stores insiders have sold more shares than they have bought in the past 3 months.
    Who owns this company?
    X
    Management checks
    We assess Wal-Mart Stores's management by checking for:
    1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
    2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
    3. Is the average tenure of the management team less than 2 years? (1 check)
    4. Is the average tenure of the board of directors team less than 3 years? (1 check)
    5. Wal-Mart Stores has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.


    Note: We use the top 6 management executives and board members in our calculations.

    Note 2: Insider trading include any internal stakeholders and these transactions.

    Full details on the Management part of the Simply Wall St company analysis model.

    Company News

    Company Info

    Description

    Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. It operates through three segments: Walmart U.S., Walmart International, and Sam’s Club. The company operates discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, cash and carry stores, home improvement stores, specialty electronics stores, apparel stores, drug stores, convenience stores, and membership-only warehouse clubs; and retail Websites, such as walmart.com and samsclub.com, as well as mobile commerce applications. It offers grocery products, including meat, produce, natural and organics, deli and bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages, floral and dry grocery, as well as consumables, such as health and beauty aids, baby products, household chemicals, paper goods, and pet supplies; and health and wellness products, which include pharmacy, optical services, clinical services, over-the-counter drugs, and other medical products. The company also provides electronics, cameras and supplies, photo processing services, cellular phones, cellular service plan contracts and prepaid service, movies, music, video games, and books; stationery, automotive, hardware and paint, sporting goods, and outdoor living and horticulture, as well as fabrics, crafts, and seasonal merchandise; apparel for women, girls, men, boys, and infants, as well as shoes, jewelry, and accessories; and home furnishings, housewares and small appliances, bedding, home decor, and toys. In addition, it offers fuel and financial services and related products, including money orders, prepaid cards, wire transfers, money transfers, check cashing, and bill payment. In addition, it offers brand name merchandise, including hardgoods, softgoods, and selected private-label items, such as Member’s Mark. It operates 11,695 stores under 59 banners in 28 countries and e-commerce Websites in 11 countries. Wal-Mart Stores, Inc. was founded in 1945 and is headquartered in Bentonville, Arkansas.

    Details
    Name:Wal-Mart Stores, Inc.
    Ticker:WMT
    Exchange:NYSE
    Founded:1945
    Market Cap:$231,785 million
    Website:http://www.stock.walmart.com
    Listings
    Map

    702 SW 8th Street, Bentonville, 72716, United States

    Number of employees
    Street

    Current staff
    Staff numbers
    2,300,000
    Wal-Mart Stores employees.
    Industry
    Industry:Hypermarkets and Super Centers
    Sector:Food and Staples Retailing