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Wal-Mart Stores

NYSE:WMT
Snowflake Description

Adequate balance sheet average dividend payer.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
WMT
NYSE
$288B
Market Cap
  1. Food and Staples Retailing
Company description

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


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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 analysis.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 Avocados) 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?
  • Wal-Mart Stores is overvalued based on earnings compared to the US Food and Staples Retailing industry average.
  • Wal-Mart Stores is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does Wal-Mart Stores's expected growth come at a high price?
  • Wal-Mart Stores is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Wal-Mart Stores's assets?
  • Wal-Mart Stores is overvalued based on assets compared to the US 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 0/6, 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 (18.55%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (2 Stage 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:
$60,302

Terminal Value

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

Terminal Value = $16,454 × (1 + 2.47%) ÷ (8.49% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$279,879

Present value of terminal value:
$186,184

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$246,485 = $60,302 + $186,184

Value = Total value / Shares Outstanding ($246,485 / 2,987)

Discount to Share Price

Value per share:
$82.51

Current discount (share price of $96.41): -16.84%



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 = 8.49% = 2.47% + (0.8 * 7.53%)



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). Note the market value of equity is used not the book value ($288,324,702,582).

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

0.621 = 0.554 (1 + (1- 30%) (17.32%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  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 (7.53%) (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 24 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!
Annual Growth Rate
8.1%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Wal-Mart Stores expected to grow at an attractive rate?
  • Wal-Mart Stores's earnings growth is expected to exceed the low risk savings rate of 3.6%.
Growth vs Market Checks
  • Wal-Mart Stores's earnings growth is positive but not above the US market average.
  • Wal-Mart Stores's revenue growth is positive but not above the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Wal-Mart Stores's earnings are expected to grow by 8.1% yearly, however this is not considered high growth (20% yearly).
  • Wal-Mart Stores's revenue is expected to grow by 2.9% yearly, however this is not considered high growth (20% yearly).
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 occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
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
  • Performance (ROE) is expected to be above the current US Food and Staples Retailing industry average.
  • An improvement in Wal-Mart Stores's performance (ROE) is expected over the next 3 years.
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Future performance checks
We assess Wal-Mart Stores's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. 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 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings 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 year on year growth rate is negative over the past 5 years and the most recent earnings are below average.
  • Wal-Mart Stores's 1 year earnings growth is negative, it can't be compared to the 5 year average.
  • Wal-Mart Stores's 1 year earnings growth is negative, it can't be compared to the US Food and Staples Retailing industry average.
Earnings and Revenue 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 < 20%) last year.
  • Wal-Mart Stores performed above the US Food and Staples Retailing industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has been diminishing over 3 years.
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Past performance checks
We assess Wal-Mart Stores's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Food and Staples Retailing industry? (1 check)
  3. Is the recent earnings growth over the last year 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 Net Income excluding extraordinary items 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's 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 total short term assets, assets are 1.3x debt.
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.
  • Wal-Mart Stores's level of debt (63.3% of total debt) compared to net worth is high (greater than 40%).
  • The level of debt compared to net worth has been reduced over the past 5 years (73.1% vs 63.3% today).
  • Total debt is well covered by annual operating cash flow (57.7%, greater than 20% of total debt).
  • Interest on debt is well covered by earnings (EBIT is 9.9x coverage).
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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 company 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
2.11%
Current annual income from Wal-Mart Stores dividends. Estimated to be 2.24% next year.
If you bought $2,000 of Wal-Mart Stores shares you are expected to receive $0 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 below low risk savings rate (2.25%).
  • Paying below 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 and Future Dividends
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 covered by net profit (1.9x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be well covered by net profit (2.2x coverage).
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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 4/6, 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
AGE 51
TENURE AS CEO 3.8 years
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. 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
  • Doug's compensation has been consistent with company performance over the past year.
  • Doug's compensation appears reasonable.
Management Team Tenure

Average tenure and age of the Wal-Mart Stores management team in years:

2.5
Average Tenure
50
Average Age
  • The tenure for the Wal-Mart Stores management team is about average.
Management Team

Doug McMillon

TITLE
CEO, President & Director
COMPENSATION
$22M
AGE
51
TENURE
3.8 yrs

Brett Biggs

TITLE
Chief Financial Officer and Executive Vice President
COMPENSATION
$6M
AGE
49
TENURE
1.8 yrs

Dave Cheesewright

TITLE
Executive VP
COMPENSATION
$13M
AGE
55
TENURE
3.8 yrs

Greg Foran

TITLE
Executive Vice President
COMPENSATION
$12M
AGE
56
TENURE
3.3 yrs

Marc Lore

TITLE
Executive VP
COMPENSATION
$244M
AGE
45
TENURE
1.2 yrs

David Chojnowski

TITLE
Principal Accounting Officer
AGE
47
TENURE
0.8 yrs

Jeremy King

TITLE
Chief Technology Officer and Executive Vice President
TENURE
1.3 yrs

Steve Schmitt

TITLE
Vice President of Investor Relations
TENURE
1.5 yrs

Karen Roberts

TITLE
Executive Vice President and General Counsel
AGE
47
TENURE
4.8 yrs

Jay Jorgensen

TITLE
Global Chief Ethics & Compliance Officer and Executive Vice President
Board of Directors Tenure

Average tenure and age of the Wal-Mart Stores board of directors in years:

8.1
Average Tenure
53.5
Average Age
  • The tenure for the Wal-Mart Stores board of directors is about average.
Board of Directors

Greg Penner

TITLE
Chairman
COMPENSATION
$469K
AGE
48
TENURE
2.4 yrs

Doug McMillon

TITLE
CEO, President & Director
COMPENSATION
$22M
AGE
51
TENURE
4 yrs

Jim Cash

TITLE
Lead Independent Director
COMPENSATION
$364K
AGE
69

Steve Reinemund

TITLE
Independent Director
COMPENSATION
$290K
AGE
69
TENURE
7.8 yrs

Tim Flynn

TITLE
Independent Director
COMPENSATION
$384K
AGE
60
TENURE
5.3 yrs

Kevin Systrom

TITLE
Independent Director
COMPENSATION
$289K
AGE
33
TENURE
3.2 yrs

Rob Walton

TITLE
Director
COMPENSATION
$269K
AGE
72
TENURE
39.8 yrs

Marissa Mayer

TITLE
Independent Director
COMPENSATION
$267K
AGE
42
TENURE
5.8 yrs

Tom Horton

TITLE
Independent Director
COMPENSATION
$318K
AGE
56
TENURE
3 yrs

Steuart Walton

TITLE
Director
COMPENSATION
$227K
AGE
35
TENURE
1.4 yrs
Recent Insider Trading
  • Wal-Mart Stores insiders have only sold shares 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 0/6, 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

Map
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 11,593 stores under 63 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: $288,324,702,582
Shares outstanding: 2,987,201,643
Website: http://www.stock.walmart.com
Address: Wal-Mart Stores, Inc.
702 SW 8th Street,
Bentonville,
Arkansas, 72716,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NYSE WMT Common Shares New York Stock Exchange US USD 03. Apr 1972
DB WMT Common Shares Deutsche Boerse AG DE EUR 03. Apr 1972
XTRA WMT Common Shares XETRA Trading Platform DE EUR 03. Apr 1972
SWX WMT Common Shares SIX Swiss Exchange CH CHF 03. Apr 1972
WBAG WMT Common Shares Wiener Boerse AG AT EUR 03. Apr 1972
SNSE WMT Common Shares Santiago Stock Exchange CL USD 03. Apr 1972
BVC WMT Common Shares Bolsa de Valores de Colombia CO COP 03. Apr 1972
BMV WMT * Common Shares Bolsa Mexicana de Valores MX MXN 03. Apr 1972
BVL WMT Common Shares Bolsa de Valores de Lima PE USD 03. Apr 1972
BOVESPA WALM34 BDR REPR 1/4 COM STK NPV Bolsa de Valores de Sao Paulo BR BRL 28. Dec 2011
BASE WMT CEDEARS 3 REP 1 COM USD0.10 Buenos Aires Stock Exchange AR ARS 19. Jul 2001
Number of employees
Current staff
Staff numbers
2,300,000
Wal-Mart Stores employees.
Industry
Industry: Hypermarkets and Super Centers
Sector: Food and Staples Retailing