Is Walmart’s 30% Rally in 2025 Justified by Its Current Valuation?

Thinking about Walmart stock? If you’ve been tracking its journey, you’re probably wondering whether to stick with it, buy more, or look elsewhere. There’s plenty to talk about given the rollercoaster we’ve seen lately. Although Walmart slipped by 1.4% in the past week, share prices have grown more than 29.9% over the last year, with an impressive 132.2% return in the past three years. Not bad for a giant many once considered a boring blue chip!

This surge ties back to some real developments in the market. Most recently, shoppers’ ongoing appetite for value in uncertain times and Walmart’s push into digital have kept investor optimism alive. Those headlines echo the signals in the chart, but they do not always tell the whole story, especially with a company of this scale. Growth has been strong, but so have questions about risk and future upside.

With so much movement and attention, Walmart’s valuation is on everyone’s mind. By the numbers, it earns a valuation score of just 1 out of 6 based on standard undervaluation checks. This is a clear sign most metrics show it as fairly priced or even slightly stretched. Still, that number does not tell the entire story. Next, I will break down the classic valuation approaches, before revealing an even more useful way to gauge where Walmart really stands.

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 (DCF) model estimates what a company is truly worth by projecting its future cash flows and discounting them back to today’s dollars. In essence, it answers the question, “What is the present value of all cash that Walmart is likely to generate over time?”

Walmart’s latest reported Free Cash Flow stands at $15.7 billion, a substantial figure that sets the stage for future growth expectations. Analyst projections suggest steady expansion, with Free Cash Flow estimates climbing to $30.9 billion by 2030. While the first five years benefit from direct analyst estimates, later numbers are extrapolated based on company trends. All values are considered in US dollars for clarity and consistency.

The DCF model used here, a two-stage Free Cash Flow to Equity approach, values Walmart shares at $106.89 each. Right now, this implies the stock is about 0.7 percent cheaper than its intrinsic value, so essentially, it is trading at close to what the model suggests it is worth.

For investors, this points to a stock that is neither a screaming buy nor dramatically overpriced. Instead, the current price already reflects the company’s long-term cash generation outlook.

Result: ABOUT RIGHT

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

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Walmart's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Walmart Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like Walmart, as it relates share price to earnings per share. This makes it especially useful for mature businesses with a consistent track record of earnings. Investors often look to the PE ratio as a quick way to gauge whether a stock may be overvalued or undervalued in the context of its profitability.

It is important to remember that what counts as a “fair” PE depends on many factors. Companies with higher growth potential or lower risk can command higher PE ratios, while those facing challenges might trade at lower ones. Risk, profit margin, and the stability of earnings all play a role in where the “right” ratio should land.

Currently, Walmart trades at a PE ratio of 39.7x. This is significantly higher than both the Consumer Retailing industry average of 20.6x and the peer group average of 25.4x. Comparing to these benchmarks tells part of the story, but not the whole picture. This is where the Simply Wall St Fair Ratio comes in. The Fair Ratio for Walmart stands at 31.8x, a proprietary measure that goes deeper than industry averages by factoring in the company’s growth outlook, risk level, margins, size, and sector dynamics. This offers a more rounded perspective than just comparing with peers or the sector.

Given that Walmart’s actual PE ratio of 39.7x is notably above its Fair Ratio, the stock appears somewhat overvalued by this measure. Investors should weigh this alongside other valuation methods before making a decision.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Walmart Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple, user-driven story that explains why you think a company is worth more, less, or about the same as its current price, connecting your financial forecast (including revenue, earnings, and margins) to your unique view of the company’s future.

Rather than just crunching numbers, Narratives let you describe the big picture behind the data: why certain catalysts, risks, and market trends might lead you to set a higher or lower fair value. By linking the company’s story directly to a financial forecast and resulting valuation, Narratives help investors make practical decisions about when to buy, hold, or sell by comparing the Fair Value to the current Price.

Narratives are easily accessible and always up to date in the Simply Wall St Community page, used by millions of investors, and automatically refresh as new news, reports, or results become available, so your thinking never gets outdated.

For example, some investors believe Walmart’s rapid AI adoption and omni-channel expansion justify a fair value as high as $127, while more cautious users, focused on rising costs and international challenges, see fair value closer to $64. Whichever perspective makes sense to you, Narratives provide the clear bridge between your story and your strategy.

Do you think there's more to the story for Walmart? Create your own Narrative to let the Community know!

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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