Has Walmart’s 2025 Rally Gone Too Far After Its Surge in Higher Margin Services?

• If you have ever wondered whether Walmart is still a buy at these levels, you are not alone. This is exactly the question we are going to unpack.
• Walmart's share price has climbed 2.2% over the last week, 12.3% over the last month, and is up 28.5% year to date, capping a run where the stock has gained 159.3% over five years.
• Investors have been reacting to Walmart's continued push into higher margin areas like advertising and membership driven services, as the company leans further into its scale advantages and digital ecosystem. Strategic moves in automation, supply chain optimization, and omnichannel retail have also helped support sentiment, giving the market more confidence in Walmart's medium term growth story.
• Despite that backdrop, Walmart currently scores just 1/6 on our valuation checks, suggesting it only looks undervalued on a single metric. Next, we will break down what different valuation approaches are really saying about the stock and finish by exploring a more holistic way to understand its true worth.

Walmart scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Walmart Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by taking its projected future cash flows and discounting them back to today in $ terms.

For Walmart, the latest twelve month Free Cash Flow is about $17.3 billion. Analysts and internal estimates see this rising steadily over time, with Simply Wall St using a 2 Stage Free Cash Flow to Equity approach, combining analyst forecasts for the next few years with extrapolated growth thereafter.

On this basis, Walmart's Free Cash Flow is projected to reach roughly $32.4 billion by 2030, with further growth into the following decade as efficiencies and scale benefits compound. These annual cash flows are then discounted back to today to arrive at an estimated intrinsic value of $116.41 per share.

Compared to the current share price, this implies the stock is only about 0.6% undervalued, effectively within a reasonable margin of error for such models.

Result: ABOUT RIGHT

Walmart is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Walmart.

Approach 2: Walmart Price vs Earnings

For profitable, mature companies like Walmart, the Price to Earnings (PE) ratio is a useful yardstick because it directly links what investors pay for the stock to the earnings the business is already generating.

In general, faster and more reliable earnings growth, with lower perceived risk, tends to justify a higher PE ratio, while slower growth or higher uncertainty usually calls for a lower, more conservative multiple.

Walmart currently trades on a PE of about 40.24x, a clear premium to both the Consumer Retailing industry average of roughly 22.01x and its broader peer group at around 26.13x. To refine that comparison, Simply Wall St uses a proprietary “Fair Ratio”, an estimate of what Walmart’s PE should be given its earnings growth outlook, industry, profit margins, size, and risk profile. This Fair Ratio for Walmart is 36.93x, which is more tailored than simple peer or industry comparisons because it folds in both company specific strengths and risk factors.

With the actual PE sitting modestly above the Fair Ratio, this multiple based view suggests Walmart is trading somewhat ahead of its fundamentals.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Walmart Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives, a simple framework on Simply Wall St's Community page that lets you attach a clear story to your assumptions about Walmart's future revenues, earnings, margins, and fair value. You can link that story directly to a living financial forecast, and then compare the resulting Fair Value to the current share price to decide whether to buy, hold, or sell. These Narratives automatically update as new earnings, news, and data arrive. For example, a more bullish Walmart investor might lean toward something closer to the high end of analyst targets near $127, while a more cautious one might anchor around the low end near $64. Each Narrative transparently shows the assumptions behind the view, rather than just a number on a screen.

Do you think there's more to the story for Walmart? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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