What is WMT's Intrinsic value?

Walmart Inc (WMT) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Walmart Inc's estimated intrinsic value ranges from $19.95 to $154.27 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $154.27 +60.8%
Discounted Cash Flow (5Y) $120.94 +26.1%
Dividend Discount Model (Multi-Stage) $98.13 +2.3%
Dividend Discount Model (Stable) $40.77 -57.5%
Earnings Power Value $19.95 -79.2%

Is Walmart Inc (WMT) undervalued or overvalued?

With the current market price at $95.93, 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 0.6 0.75
Cost of equity 6.6% 9.1%
Cost of debt 5.0% 5.0%
Tax rate 25.5% 28.7%
Debt/Equity ratio 0.06 0.06
After-tax WACC 6.5% 8.8%

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: 7.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $680,985 (FY01-2025) to $1,187,596 (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 $121 $1,004,374M 79.1%
10-Year Growth $154 $1,271,083M 63.6%
5-Year EBITDA $116 $967,843M 78.3%
10-Year EBITDA $147 $1,215,176M 61.9%

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: 34.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.8%
  • Long-term growth rate: 2.0%
  • Fair value: $98.13 (2.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.1% (Low) to 6.6% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $21 to $61
  • Selected fair value: $40.77 (-57.5% 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) 8.8% - 6.5%
Enterprise Value $166,366M - $226,383M
Net Debt $36,753M
Equity Value $129,613M - $189,630M
Outstanding Shares 8,001M
Fair Value $16 - $24
Selected Fair Value $19.95

Key Financial Metrics

Metric Value
Market Capitalization $767525M
Enterprise Value $804278M
Trailing P/E 39.49
Forward P/E 26.80
Trailing EV/EBITDA 10.05
Current Dividend Yield 85.09%
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% $46.28
Discounted Cash Flow (5Y) 25% $30.23
Dividend Discount Model (Multi-Stage) 20% $19.63
Dividend Discount Model (Stable) 15% $6.12
Earnings Power Value 10% $2.00
Weighted Average 100% $104.25

Investment Conclusion

Based on our comprehensive valuation analysis, Walmart Inc's weighted average intrinsic value is $104.25, which is approximately 8.7% above the current market price of $95.93.

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.