DCF Studio

    WMT · NMS · Consumer Defensive

    Walmart Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 36.40

    Market price

    USD 106.73

    Implied upside

    -65.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 3.3% of revenue against depreciation of 1.9%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 20.6x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 36.40-65.9%
    Exit multiple
    USD 93.95-12.0%
    Market price
    USD 106.73

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn9bn17bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 750.8bnUSD 790.3bnUSD 832.0bnUSD 875.9bnUSD 922.1bn+5.3%
    EBITUSD 30.0bnUSD 31.6bnUSD 33.3bnUSD 35.0bnUSD 36.9bn+5.3%
    NOPATUSD 23.7bnUSD 25.0bnUSD 26.3bnUSD 27.7bnUSD 29.1bn+5.3%
    Add depreciation & amortisationUSD 14.1bnUSD 14.9bnUSD 15.6bnUSD 16.5bnUSD 17.3bn+5.3%
    Less capital expenditureUSD -24.7bnUSD -26.0bnUSD -27.4bnUSD -28.8bnUSD -30.3bn+5.3%
    Less increase in working capitalUSD 878.7mUSD 925.0mUSD 973.8mUSD 1.0bnUSD 1.1bn-5.3%
    Free cashflow to firmUSD 14.0bnUSD 14.7bnUSD 15.5bnUSD 16.3bnUSD 17.2bn+5.3%
    Discount factor0.95940.88320.81300.74830.6889-
    Present valueUSD 13.4bnUSD 13.0bnUSD 12.6bnUSD 12.2bnUSD 11.8bn-3.1%
    Present Value Of The ForecastUSD 63.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.729Reported 0.595, pulled toward 1.0 (Blume)
    Cost of equity9.01%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 849.4bn92.7% of capital
    Total debtUSD 67.1bn7.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.64%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 36.40

    82% of EV

    Forecast FCFF, final year
    USD 17.2bn
    Capex at depreciation, working capital in reinvestment
    USD 29.1bn
    Less reinvestment at g/ROIC (14.9% of NOPAT)
    USD -4.4bn
    Capitalised
    USD 24.8bn
    ROIC (reported)
    16.7%
    Terminal value, undiscounted
    USD 414.1bn
    Terminal value, discounted
    USD 285.3bn
    Enterprise value
    USD 348.4bn
    Less net debt
    USD 56.4bn
    Equity value
    USD 292.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 93.95

    92% of EV

    Terminal value, undiscounted
    USD 1084.2bn
    Terminal value, discounted
    USD 746.9bn
    Enterprise value
    USD 810.0bn
    Less net debt
    USD 56.4bn
    Equity value
    USD 753.6bn

    Spread between methods: 88%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.64%50.1653.9258.5764.4872.24
    7.64%40.3142.6045.3248.6052.66
    8.64%33.2534.7136.4138.3840.73
    9.64%27.9428.9230.0131.2632.71
    10.64%23.8224.4825.2126.0326.95

    Outlined: this model. Green text: above today's price of 106.73. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year5.3%28.4%+23.1pp
    EBIT margin4.0%9.8%+5.8pp
    Discount rate8.6%4.9%-3.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.