Intrinsic value of Wal-Mart Stores - WMT

Previous Close

$85.74

  Intrinsic Value

$72.20

stock screener

  Rating & Target

hold

-16%

  Value-price divergence*

-69%

Previous close

$85.74

 
Intrinsic value

$72.20

 
Up/down potential

-16%

 
Rating

hold

 
Value-price divergence*

-69%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of WMT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 260.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  0.78
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  485,873
  496,076
  507,933
  521,398
  536,445
  553,060
  571,243
  591,001
  612,353
  635,327
  659,955
  686,279
  714,348
  744,214
  775,939
  809,588
  845,234
  882,954
  922,831
  964,956
  1,009,423
  1,056,335
  1,105,800
  1,157,932
  1,212,853
  1,270,690
  1,331,579
  1,395,663
  1,463,092
  1,534,026
  1,608,632
Variable operating expenses, $m
 
  471,237
  482,459
  495,203
  509,445
  525,172
  542,381
  561,082
  581,292
  603,036
  626,347
  649,559
  676,126
  704,394
  734,421
  766,270
  800,008
  835,710
  873,453
  913,324
  955,413
  999,815
  1,046,633
  1,095,975
  1,147,957
  1,202,700
  1,260,331
  1,320,986
  1,384,807
  1,451,946
  1,522,560
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  463,109
  471,237
  482,459
  495,203
  509,445
  525,172
  542,381
  561,082
  581,292
  603,036
  626,347
  649,559
  676,126
  704,394
  734,421
  766,270
  800,008
  835,710
  873,453
  913,324
  955,413
  999,815
  1,046,633
  1,095,975
  1,147,957
  1,202,700
  1,260,331
  1,320,986
  1,384,807
  1,451,946
  1,522,560
Operating income, $m
  22,764
  24,840
  25,474
  26,194
  27,000
  27,889
  28,861
  29,919
  31,061
  32,290
  33,608
  36,720
  38,222
  39,820
  41,518
  43,318
  45,225
  47,244
  49,377
  51,631
  54,011
  56,521
  59,167
  61,957
  64,895
  67,990
  71,248
  74,677
  78,285
  82,080
  86,072
EBITDA, $m
  32,844
  35,518
  36,367
  37,331
  38,408
  39,598
  40,900
  42,315
  43,843
  45,488
  47,252
  49,136
  51,146
  53,284
  55,556
  57,965
  60,517
  63,218
  66,073
  69,089
  72,273
  75,632
  79,173
  82,906
  86,838
  90,979
  95,338
  99,927
  104,755
  109,833
  115,175
Interest expense (income), $m
  2,351
  2,059
  2,176
  2,316
  2,475
  2,653
  2,849
  3,064
  3,297
  3,549
  3,820
  4,111
  4,422
  4,753
  5,105
  5,480
  5,877
  6,298
  6,743
  7,214
  7,711
  8,236
  8,790
  9,374
  9,989
  10,637
  11,320
  12,039
  12,795
  13,591
  14,429
Earnings before tax, $m
  20,497
  22,781
  23,298
  23,878
  24,524
  25,236
  26,012
  26,855
  27,764
  28,741
  29,788
  32,610
  33,801
  35,067
  36,412
  37,838
  39,348
  40,946
  42,634
  44,417
  46,300
  48,285
  50,378
  52,583
  54,906
  57,353
  59,928
  62,638
  65,490
  68,489
  71,644
Tax expense, $m
  6,204
  6,151
  6,290
  6,447
  6,622
  6,814
  7,023
  7,251
  7,496
  7,760
  8,043
  8,805
  9,126
  9,468
  9,831
  10,216
  10,624
  11,055
  11,511
  11,993
  12,501
  13,037
  13,602
  14,197
  14,825
  15,485
  16,181
  16,912
  17,682
  18,492
  19,344
Net income, $m
  13,643
  16,630
  17,007
  17,431
  17,903
  18,422
  18,989
  19,604
  20,268
  20,981
  21,745
  23,805
  24,674
  25,599
  26,581
  27,622
  28,724
  29,890
  31,123
  32,425
  33,799
  35,248
  36,776
  38,386
  40,082
  41,868
  43,747
  45,726
  47,807
  49,997
  52,300

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,602
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  198,825
  196,233
  200,923
  206,249
  212,201
  218,774
  225,966
  233,782
  242,228
  251,316
  261,058
  271,471
  282,574
  294,389
  306,938
  320,249
  334,349
  349,270
  365,044
  381,707
  399,297
  417,854
  437,421
  458,043
  479,768
  502,646
  526,732
  552,082
  578,755
  606,814
  636,326
Adjusted assets (=assets-cash), $m
  192,223
  196,233
  200,923
  206,249
  212,201
  218,774
  225,966
  233,782
  242,228
  251,316
  261,058
  271,471
  282,574
  294,389
  306,938
  320,249
  334,349
  349,270
  365,044
  381,707
  399,297
  417,854
  437,421
  458,043
  479,768
  502,646
  526,732
  552,082
  578,755
  606,814
  636,326
Revenue / Adjusted assets
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
  2.528
Average production assets, $m
  115,347
  117,570
  120,380
  123,571
  127,137
  131,075
  135,384
  140,067
  145,128
  150,572
  156,409
  162,648
  169,300
  176,379
  183,898
  191,872
  200,320
  209,260
  218,711
  228,694
  239,233
  250,351
  262,075
  274,430
  287,446
  301,153
  315,584
  330,772
  346,753
  363,564
  381,246
Working capital, $m
  -9,239
  -12,402
  -12,698
  -13,035
  -13,411
  -13,827
  -14,281
  -14,775
  -15,309
  -15,883
  -16,499
  -17,157
  -17,859
  -18,605
  -19,398
  -20,240
  -21,131
  -22,074
  -23,071
  -24,124
  -25,236
  -26,408
  -27,645
  -28,948
  -30,321
  -31,767
  -33,289
  -34,892
  -36,577
  -38,351
  -40,216
Total debt, $m
  45,938
  44,417
  47,273
  50,517
  54,142
  58,144
  62,524
  67,284
  72,428
  77,962
  83,895
  90,237
  96,999
  104,194
  111,836
  119,942
  128,529
  137,616
  147,223
  157,371
  168,083
  179,384
  191,300
  203,859
  217,090
  231,023
  245,691
  261,129
  277,373
  294,461
  312,434
Total liabilities, $m
  121,027
  119,506
  122,362
  125,606
  129,231
  133,233
  137,613
  142,373
  147,517
  153,051
  158,984
  165,326
  172,088
  179,283
  186,925
  195,031
  203,618
  212,705
  222,312
  232,460
  243,172
  254,473
  266,389
  278,948
  292,179
  306,112
  320,780
  336,218
  352,462
  369,550
  387,523
Total equity, $m
  77,798
  76,727
  78,561
  80,643
  82,971
  85,541
  88,353
  91,409
  94,711
  98,265
  102,074
  106,145
  110,487
  115,106
  120,013
  125,217
  130,730
  136,564
  142,732
  149,247
  156,125
  163,381
  171,032
  179,095
  187,589
  196,535
  205,952
  215,864
  226,293
  237,264
  248,803
Total liabilities and equity, $m
  198,825
  196,233
  200,923
  206,249
  212,202
  218,774
  225,966
  233,782
  242,228
  251,316
  261,058
  271,471
  282,575
  294,389
  306,938
  320,248
  334,348
  349,269
  365,044
  381,707
  399,297
  417,854
  437,421
  458,043
  479,768
  502,647
  526,732
  552,082
  578,755
  606,814
  636,326
Debt-to-equity ratio
  0.590
  0.580
  0.600
  0.630
  0.650
  0.680
  0.710
  0.740
  0.760
  0.790
  0.820
  0.850
  0.880
  0.910
  0.930
  0.960
  0.980
  1.010
  1.030
  1.050
  1.080
  1.100
  1.120
  1.140
  1.160
  1.180
  1.190
  1.210
  1.230
  1.240
  1.260
Adjusted equity ratio
  0.376
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391
  0.391

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13,643
  16,630
  17,007
  17,431
  17,903
  18,422
  18,989
  19,604
  20,268
  20,981
  21,745
  23,805
  24,674
  25,599
  26,581
  27,622
  28,724
  29,890
  31,123
  32,425
  33,799
  35,248
  36,776
  38,386
  40,082
  41,868
  43,747
  45,726
  47,807
  49,997
  52,300
Depreciation, amort., depletion, $m
  10,080
  10,679
  10,893
  11,137
  11,409
  11,709
  12,038
  12,396
  12,782
  13,198
  13,643
  12,416
  12,924
  13,464
  14,038
  14,647
  15,292
  15,974
  16,695
  17,458
  18,262
  19,111
  20,006
  20,949
  21,942
  22,989
  24,090
  25,250
  26,470
  27,753
  29,103
Funds from operations, $m
  37,720
  27,308
  27,900
  28,568
  29,312
  30,131
  31,027
  32,000
  33,050
  34,179
  35,389
  36,221
  37,598
  39,063
  40,619
  42,269
  44,016
  45,864
  47,818
  49,882
  52,061
  54,359
  56,781
  59,335
  62,024
  64,856
  67,838
  70,976
  74,277
  77,750
  81,403
Change in working capital, $m
  6,190
  -255
  -296
  -337
  -376
  -415
  -455
  -494
  -534
  -574
  -616
  -658
  -702
  -747
  -793
  -841
  -891
  -943
  -997
  -1,053
  -1,112
  -1,173
  -1,237
  -1,303
  -1,373
  -1,446
  -1,522
  -1,602
  -1,686
  -1,773
  -1,865
Cash from operations, $m
  31,530
  27,564
  28,197
  28,904
  29,688
  30,547
  31,482
  32,494
  33,584
  34,753
  36,004
  36,879
  38,300
  39,810
  41,412
  43,110
  44,907
  46,807
  48,815
  50,935
  53,172
  55,531
  58,018
  60,638
  63,397
  66,302
  69,360
  72,578
  75,963
  79,523
  83,268
Maintenance CAPEX, $m
  0
  -8,805
  -8,975
  -9,189
  -9,433
  -9,705
  -10,006
  -10,335
  -10,692
  -11,078
  -11,494
  -11,940
  -12,416
  -12,924
  -13,464
  -14,038
  -14,647
  -15,292
  -15,974
  -16,695
  -17,458
  -18,262
  -19,111
  -20,006
  -20,949
  -21,942
  -22,989
  -24,090
  -25,250
  -26,470
  -27,753
New CAPEX, $m
  -10,619
  -2,223
  -2,810
  -3,191
  -3,566
  -3,938
  -4,309
  -4,683
  -5,061
  -5,445
  -5,837
  -6,239
  -6,652
  -7,078
  -7,519
  -7,975
  -8,448
  -8,940
  -9,451
  -9,984
  -10,539
  -11,118
  -11,723
  -12,355
  -13,016
  -13,707
  -14,431
  -15,188
  -15,981
  -16,811
  -17,682
Cash from investing activities, $m
  -13,987
  -11,028
  -11,785
  -12,380
  -12,999
  -13,643
  -14,315
  -15,018
  -15,753
  -16,523
  -17,331
  -18,179
  -19,068
  -20,002
  -20,983
  -22,013
  -23,095
  -24,232
  -25,425
  -26,679
  -27,997
  -29,380
  -30,834
  -32,361
  -33,965
  -35,649
  -37,420
  -39,278
  -41,231
  -43,281
  -45,435
Free cash flow, $m
  17,543
  16,535
  16,412
  16,524
  16,689
  16,904
  17,167
  17,477
  17,831
  18,230
  18,673
  18,700
  19,232
  19,808
  20,429
  21,097
  21,812
  22,576
  23,390
  24,256
  25,176
  26,151
  27,184
  28,277
  29,432
  30,652
  31,941
  33,299
  34,732
  36,242
  37,833
Issuance/(repayment) of debt, $m
  -3,591
  2,399
  2,856
  3,244
  3,625
  4,003
  4,380
  4,760
  5,144
  5,534
  5,933
  6,342
  6,762
  7,195
  7,643
  8,106
  8,587
  9,087
  9,607
  10,148
  10,712
  11,301
  11,916
  12,559
  13,230
  13,933
  14,668
  15,438
  16,244
  17,088
  17,973
Issuance/(repurchase) of shares, $m
  -8,298
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -12,713
  2,399
  2,856
  3,244
  3,625
  4,003
  4,380
  4,760
  5,144
  5,534
  5,933
  6,342
  6,762
  7,195
  7,643
  8,106
  8,587
  9,087
  9,607
  10,148
  10,712
  11,301
  11,916
  12,559
  13,230
  13,933
  14,668
  15,438
  16,244
  17,088
  17,973
Total cash flow (excl. dividends), $m
  4,378
  18,934
  19,268
  19,767
  20,314
  20,907
  21,547
  22,236
  22,975
  23,765
  24,606
  25,042
  25,993
  27,003
  28,072
  29,203
  30,399
  31,663
  32,997
  34,404
  35,888
  37,452
  39,100
  40,836
  42,663
  44,585
  46,609
  48,737
  50,976
  53,330
  55,806
Retained Cash Flow (-), $m
  2,748
  -1,611
  -1,834
  -2,083
  -2,327
  -2,570
  -2,812
  -3,056
  -3,303
  -3,553
  -3,809
  -4,072
  -4,341
  -4,619
  -4,907
  -5,204
  -5,513
  -5,834
  -6,168
  -6,515
  -6,878
  -7,256
  -7,651
  -8,063
  -8,494
  -8,946
  -9,418
  -9,912
  -10,429
  -10,971
  -11,539
Prev. year cash balance distribution, $m
 
  2,682
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  20,005
  17,434
  17,685
  17,986
  18,337
  18,735
  19,180
  19,672
  20,211
  20,797
  20,970
  21,652
  22,383
  23,165
  23,999
  24,886
  25,829
  26,829
  27,889
  29,011
  30,197
  31,450
  32,772
  34,168
  35,640
  37,191
  38,826
  40,547
  42,359
  44,267
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  19,162
  15,929
  15,342
  14,745
  14,131
  13,498
  12,844
  12,166
  11,466
  10,746
  9,793
  9,065
  8,328
  7,589
  6,856
  6,134
  5,433
  4,759
  4,120
  3,522
  2,971
  2,471
  2,023
  1,631
  1,292
  1,005
  767
  573
  420
  300
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Wal-Mart Stores, Inc. is engaged in the operation of retail, wholesale and other units in various formats around the world. The Company operates through three segments: Walmart U.S., Walmart International and Sam's Club. The Walmart U.S. segment includes its mass merchant concept in the United States operating under the Walmart or Wal-Mart brands, as well as digital retail. The Walmart International segment consists of the Company's operations outside of the United States, including various retail Websites. The Walmart International segment includes various formats divided into three categories: retail, wholesale and other. These categories consist of various formats, including supercenters, supermarkets, and warehouse clubs, such as Sam's Clubs, cash and carry, home improvement, specialty electronics, apparel stores, drug stores and convenience stores, as well as digital retail. The Sam's Club segment includes the warehouse membership clubs in the United States, and samsclub.com.

FINANCIAL RATIOS  of  Wal-Mart Stores (WMT)

Valuation Ratios
P/E Ratio 19.2
Price to Sales 0.5
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 12.5
Growth Rates
Sales Growth Rate 0.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.5%
Cap. Spend. - 3 Yr. Gr. Rate -4.1%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 54%
Total Debt to Equity 59%
Interest Coverage 10
Management Effectiveness
Return On Assets 7.7%
Ret/ On Assets - 3 Yr. Avg. 8.2%
Return On Total Capital 10.7%
Ret/ On T. Cap. - 3 Yr. Avg. 11.4%
Return On Equity 17.2%
Return On Equity - 3 Yr. Avg. 18.7%
Asset Turnover 2.4
Profitability Ratios
Gross Margin 25.6%
Gross Margin - 3 Yr. Avg. 25.2%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 7.1%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 5.1%
Pre-Tax Margin 4.2%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 2.8%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 30.3%
Eff/ Tax Rate - 3 Yr. Avg. 30.9%
Payout Ratio 45.6%

WMT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WMT stock intrinsic value calculation we used $485873 million for the last fiscal year's total revenue generated by Wal-Mart Stores. The default revenue input number comes from 2017 income statement of Wal-Mart Stores. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our WMT stock valuation model: a) initial revenue growth rate of 2.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.4%, whose default value for WMT is calculated based on our internal credit rating of Wal-Mart Stores, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Wal-Mart Stores.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of WMT stock the variable cost ratio is equal to 95%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for WMT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.9% for Wal-Mart Stores.

Corporate tax rate of 27% is the nominal tax rate for Wal-Mart Stores. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the WMT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for WMT are equal to 23.7%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Wal-Mart Stores operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for WMT is equal to -2.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $77798 million for Wal-Mart Stores - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 3042.73 million for Wal-Mart Stores is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Wal-Mart Stores at the current share price and the inputted number of shares is $260.9 billion.

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COMPANY NEWS

▶ Is Wal-Mart Stores Inc. a Buy?   [08:30AM  Motley Fool]
▶ Wal-Mart pushes Dow to record   [04:49AM  CNBC Videos]
▶ Grocers Imagine the Store of the Future   [12:17AM  The Wall Street Journal]
▶ Does Walmart Deserve All This Buzz?   [10:00AM  TheStreet.com]
▶ Wal-Mart finds way to appeal to millennial shoppers   [Oct-14-17 12:01PM  MarketWatch]
▶ [$$] Resetting Wal-Mart and Revising the Chaos Trade   [Oct-13-17 11:56PM  Barrons.com]
▶ 6 buys in the retail sector   [Oct-12-17 05:00PM  CNBC Videos]
▶ [$$] Wal-Mart Could Be a $100 Stock   [08:27AM  Barrons.com]
▶ Why Wal-Mart isn't done going higher   [07:07PM  CNBC Videos]
▶ The Huge News Wal-Mart Didn't Make About Wages   [05:12PM  Investor's Business Daily]
▶ What Happened in the Stock Market Today   [04:56PM  Motley Fool]
▶ Wal-Mart: A Digital Darling?   [11:32AM  Barrons.com]
▶ Will Analysts Upgrade Walmart Stock?   [11:05AM  Market Realist]
▶ Is Walmart Poised to Grow?   [09:36AM  Market Realist]
▶ A Look at Walmarts Dividend Curve   [09:08AM  Market Realist]
▶ Today's Top Supply Chain and Logistics News From WSJ   [06:20AM  The Wall Street Journal]
▶ Walmart Supercenter opens at Metrocenter   [03:20AM  American City Business Journals]
▶ Dow Notches New Record as Walmart Sparks Consumer Rally   [Oct-10-17 10:30PM  TheStreet.com]
Financial statements of WMT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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