Our Calculation Of Intrinsic Value: Walmart Inc

Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Walmart Inc. (WMT).

Profile

Walmart is the world’s largest retailer, serving hundreds of millions of customers each week through a vast network of supercenters, discount stores, neighborhood markets, warehouse clubs, and rapidly expanding e-commerce operations. The company has built one of the strongest retail ecosystems globally, combining unmatched purchasing scale, an extensive distribution network, and increasing digital capabilities.

While its traditional retail business remains the primary revenue driver, Walmart continues investing heavily in e-commerce, automation, supply chain technology, digital advertising, healthcare services, and membership programs through Walmart+.

Walmart’s business model is driven by:

• Grocery and general merchandise sales

• Expanding e-commerce and omnichannel fulfillment

• Membership income from Sam’s Club and Walmart+

• High-margin advertising and marketplace services

Walmart’s competitive advantages include:

• The world’s largest retail network

• Exceptional purchasing power and supply chain efficiency

• Highly resilient cash flow generation

• A trusted brand with everyday low-price leadership

• Strong investment-grade balance sheet

The business also benefits from long-term structural tailwinds including continued grocery demand, increasing online shopping penetration, advertising growth, and ongoing expansion of its marketplace and fulfillment ecosystem.

DCF Analysis

Inputs:

Discount Rate: 9%

Terminal Growth Rate: 3%

WACC: 9%

Forecasted Free Cash Flows (in billions USD)

Walmart continues generating highly predictable free cash flow supported by resilient consumer demand, steady revenue growth, and disciplined capital allocation. While margins remain relatively modest for a retailer, the company’s scale and operating efficiency produce consistent long-term cash generation.

2027: $15.0 → PV: $13.8B

2028: $16.0 → PV: $13.5B

2029: $17.0 → PV: $13.1B

2030: $18.0 → PV: $12.8B

2031: $19.0 → PV: $12.4B

Total Present Value of FCFs = ~$65.6B

Terminal Value Calculation

Using the perpetuity growth model with 2031 FCF of $19.0B:

TV = (19.0 × 1.03) ÷ (0.09 − 0.03)

Terminal Value ≈ $326B

Present Value of Terminal Value ≈ $212B

Enterprise Value

Enterprise Value = $65.6B + $212B

Enterprise Value ≈ $278B

Net Debt Position

Cash & Equivalents: ~$11.3B

Total Debt: ~$67.1B

Net Debt ≈ $55.8B

Equity Value & Per-Share Value

Equity Value = $278B − $55.8B

Equity Value ≈ $222B

Shares Outstanding: ~7.97B

Intrinsic Value per Share ≈ $28

Conclusion

DCF Value: ~$28

Current Price: ~$114

Margin of Safety: ~-75%

Walmart remains one of the highest-quality businesses in the global retail sector. The company continues delivering dependable revenue growth, resilient operating performance, and strong free cash flow while benefiting from its unmatched scale, logistics network, and dominant position in grocery retailing.

Management continues investing aggressively in automation, e-commerce fulfillment, digital advertising, and marketplace expansion, all of which have the potential to improve profitability over time. Walmart is also returning capital to shareholders through share repurchases and its long-standing dividend program.

The balance sheet remains solid and provides flexibility to continue investing in technology and infrastructure while maintaining financial strength. Few retailers possess Walmart’s combination of brand recognition, purchasing power, supply chain efficiency, and customer reach.

While the long-term business outlook remains attractive, much of that quality appears reflected in the current share price. A conservative discounted cash flow analysis suggests investors are paying a significant premium for Walmart’s stability, defensive characteristics, and future growth opportunities.

For long-term investors, Walmart remains an exceptional business with durable competitive advantages. However, from a valuation perspective, the current market price appears to offer a limited margin of safety under conservative discounted cash flow assumptions.