What is WMT's Intrinsic value?

Walmart Inc (WMT) Intrinsic Value Analysis

Executive Summary

As of June 4, 2025, Walmart Inc's estimated intrinsic value ranges from $19.74 to $155.72 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $155.72 +55.7%
Discounted Cash Flow (5Y) $119.14 +19.2%
Dividend Discount Model (Multi-Stage) $97.02 -3.0%
Dividend Discount Model (Stable) $41.50 -58.5%
Earnings Power Value $19.74 -80.3%

Is Walmart Inc (WMT) undervalued or overvalued?

With the current market price at $99.98, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Walmart Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.55 0.72
Cost of equity 6.4% 8.9%
Cost of debt 5.0% 5.0%
Tax rate 25.5% 28.7%
Debt/Equity ratio 0.06 0.06
After-tax WACC 6.3% 8.6%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $680,985 (FY01-2025) to $1,163,575 (FY01-2035)
  • Net profit margin expansion from 3% to 8%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $119 $996,798M 80.0%
10-Year Growth $156 $1,289,431M 65.0%
5-Year EBITDA $113 $945,451M 79.0%
10-Year EBITDA $147 $1,222,282M 63.1%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 36.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.7%
  • Long-term growth rate: 2.0%
  • Fair value: $97.02 (-3.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.9% (Low) to 6.4% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $21 to $62
  • Selected fair value: $41.50 (-58.5% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $14,611M
Discount Rate (WACC) 8.6% - 6.3%
Enterprise Value $169,586M - $233,468M
Net Debt $43,558M
Equity Value $126,028M - $189,910M
Outstanding Shares 8,001M
Fair Value $16 - $24
Selected Fair Value $19.74

Key Financial Metrics

Metric Value
Market Capitalization $799929M
Enterprise Value $843487M
Trailing P/E 42.51
Forward P/E 28.67
Trailing EV/EBITDA 10.25
Current Dividend Yield 87.32%
Dividend Growth Rate (5Y) 2.26%
Debt-to-Equity Ratio 0.06

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $46.71
Discounted Cash Flow (5Y) 25% $29.79
Dividend Discount Model (Multi-Stage) 20% $19.40
Dividend Discount Model (Stable) 15% $6.22
Earnings Power Value 10% $1.97
Weighted Average 100% $104.10

Investment Conclusion

Based on our comprehensive valuation analysis, Walmart Inc's weighted average intrinsic value is $104.10, which is approximately 4.1% above the current market price of $99.98.

Key investment considerations:

  • Strong projected earnings growth (3% to 8% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.06)
  • Historical dividend growth of 2.26%

Given these factors, we believe Walmart Inc is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.