Walmart Inc.
Weekly Valuation: Walmart Inc. – Valutico | 3 June 2022
Detailed valuation: click here
Overview
Walmart is a company of superlatives. Not only is it the world’s leading retailer, but also the world’s largest company by sales, as well as the world’s largest employer. In numbers, Walmart’s revenues of USD572bn dwarves the GDP of countries such as Norway, Ireland, Thailand, or Argentina. The company employs more than 2.3 million staff, which exceeds the entire population of Slovenia. In 1991, Walmart opened its first shop in Mexico City through a joint venture, followed by Canada in 1994 and China in 1996. In 1997, the group achieved sales of over $100 billion for the first year. In 2018, the group reached a total turnover of over 514 billion US dollars. By comparison, online giant Amazon achieved sales of around 233 billion US dollars in the same year and ranked second.
Tumultuous development
Walmart shares hit their all-time high at almost $160/share in late April 2022. However, since then, a lot has happened. Investors all across the retail space have faced significant losses in
the past month, as inflation soars, supply chains struggle (just think formula milk), and interest rate hikes start to bite. These factors put strong pressure on (operating) performance of retailers. Walmart was no exception to this. On 17 May, Walmart announced its 2021 results, featuring a 23% decline in operating income due to rising costs and supply-chain issues. The share price plummeted by 25% within a day.
Although sales increased by 2.4 per cent to 141.6 billion dollars compared to the same period last year, operating profit fell by about a quarter to 2.1 billion dollars. Walmart attributes this to high inflation and increased costs for fuel and personnel. The company also expects higher burdens in the following quarters and is more pessimistic about profits for the current business year with a 1% decline in operating profit expected. After the last quarterly figures, Walmart had still forecast an increase of 3%. The share price reacted to the announcements with a significant slide.
Despite this recent turmoil, Walmart has proven a stable investment for decades. Walmart has
increased its dividend for the past 49 consecutive years.
Valutico Valuation
Our income based valuation methodology, using analyst estimates, delivers a materially different result compared to the market approach using Walmart’s peers. Our flow-to-equity valuation is about one-third higher (USD 455bn) than the multiple valuations. The market cap is in the middle of our approaches at USD 354bn. The diverse valuation range clearly speaks to uncertainty in the market and thus we consider the current trading value to be fair. For details, see the link below and the following information.
Detailed valuation: click here
