Walmart Inc.: Our Calculation Of Intrinsic Value

Image Source: Mike Mozart, Flickr
 

As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Walmart Inc. (WMT).
 

Profile

Walmart Inc. is the world’s largest retailer by revenue, operating a vast network of stores and ecommerce platforms across the U.S. and international markets. The company operates through three primary segments: Walmart U.S. (largest and most profitable), Walmart International, and Sam’s Club. Walmart has steadily increased its focus on omnichannel retail, combining its massive store footprint with growing ecommerce capabilities. It continues to invest in automation, logistics, and digital transformation, aiming to improve customer convenience and operational efficiency.
 

DCF Analysis

Inputs

  • Discount Rate: 7%
  • Terminal Growth Rate: 1%
  • WACC: 7%

Forecasted Free Cash Flows (FCFs) in billions

Year FCF ($B) Present Value ($B)
2025 14.0 13.08
2026 15.5 13.54
2027 16.5 13.48
2028 17.5 13.30
2029 18.5 13.09

Total Present Value of FCFs = 66.49 billion

Terminal Value Calculation

Using the perpetuity growth model:

Terminal Value = (FCF_2029 × (1 + g)) / (r – g)
= (18.5 × 1.01) / (0.07 – 0.01)
= 18.685 / 0.06
311.42 billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5
= 311.42 / (1.07)^5
221.90 billion

Enterprise Value Calculation

Enterprise Value = PV of FCFs + PV of Terminal Value
= 66.49 + 221.90
288.39 billion

Net Debt Calculation

Net Debt = Total Debt – Total Cash
= 60 – 9
51 billion

Equity Value Calculation

Equity Value = Enterprise Value – Net Debt
= 288.39 – 51
237.39 billion

Per-Share DCF Value

Shares Outstanding = 8.024 billion

Per-Share DCF Value = Equity Value / Shares Outstanding
= 237.39 / 8.024
$29.59


Conclusion

DCF Value Current Price Margin of Safety
$29.59 $91.19 -67.55%

Based on the DCF valuation, Walmart appears overvalued. The estimated intrinsic value of $29.59 per share is significantly below the current market price of $91.19, resulting in a -67.55% Margin of Safety.

This suggests that Walmart may be trading at a premium to its fundamental valuation based on our discounted cash flow analysis.


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