Walmart (WMT): Evaluating Valuation After Notable Share Price Momentum

Walmart (WMT) has made waves in the market this week, prompting investors to pause and consider their next move with the stock. There is no single event grabbing headlines; however, the recent uptick in Walmart’s share price has people asking whether this shift signals deeper changes for the retail giant or if it is just another ripple in an otherwise steady year.

Over the past year, Walmart’s stock has posted a strong 30% gain, fueled by consistent revenue and net income growth, as well as a continued push to strengthen its core business and digital offerings. The company has maintained solid momentum both in recent months and over the longer term, showing returns of nearly 10% for the past three months and a remarkable 142% over three years.

After this run, is Walmart now trading at an attractive valuation, or is the recent move already factoring in all the company’s growth prospects?

Most Popular Narrative: 38.6% Overvalued

The most well-followed narrative on Walmart’s current valuation calls the stock significantly overvalued, trading at a steep premium to its calculated fair value.

As initially anticipated, Walmart benefited from the strong brand and ever-optimizing price consciousness. Although the company has more space to maneuver with cost-saving, particularly given the use of AI technologies, a softening labor market poses a challenge for retailers. Regardless of how efficiently they put products on shelves, they cannot force customers to buy them. I believe that the company is fairly valued at the moment.

Want to understand what’s driving this surprising verdict on Walmart? The key pillars behind the overvaluation call are not what you might think. There is a financial assumption here: a bold prediction about revenue growth and efficiency margins that determines the price target. Which numbers are making even the bulls pause? Keep reading to discover what could tip the scale for this retail heavyweight.

Result: Fair Value of $74.67 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, challenges like rising retail theft and shifting consumer health trends could quickly undermine Walmart's strong momentum, which could in turn alter its growth outlook.

Find out about the key risks to this Walmart narrative.

Another View: The SWS DCF Model Perspective

Looking at Walmart’s valuation through our DCF model lens brings another layer of insight. Interestingly, this approach also suggests the stock is trading above what is considered fair value, echoing the overvalued call. Does this add conviction to the case, or could there be hidden elements the model might overlook?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Walmart for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Walmart Narrative

If you have a different take or want to dig deeper into Walmart’s story yourself, you are only a few clicks away from building your own perspective. Do it your way

A great starting point for your Walmart research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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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