Intrinsic value of Wal-Mart Stores - WMT

Previous Close

$79.31

  Intrinsic Value

$72.08

stock screener

  Rating & Target

hold

-9%

  Value-price divergence*

-13%

Previous close

$79.31

 
Intrinsic value

$72.08

 
Up/down potential

-9%

 
Rating

hold

 
Value-price divergence*

-13%

*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 241.0

 

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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  485,873
  495,590
  506,989
  520,019
  534,647
  550,856
  568,640
  588,006
  608,969
  631,554
  655,791
  681,721
  709,389
  738,848
  770,156
  803,378
  838,585
  875,852
  915,263
  956,905
  1,000,872
  1,047,265
  1,096,191
  1,147,762
  1,202,098
  1,259,326
  1,319,580
  1,383,002
  1,449,739
  1,519,950
  1,593,800
Variable operating expenses, $m
 
  470,777
  481,566
  493,898
  507,743
  523,085
  539,918
  558,248
  578,089
  599,465
  622,406
  645,244
  671,432
  699,315
  728,948
  760,392
  793,715
  828,988
  866,290
  905,704
  947,319
  991,230
  1,037,537
  1,086,349
  1,137,778
  1,191,944
  1,248,974
  1,309,002
  1,372,169
  1,438,623
  1,508,521
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
  470,777
  481,566
  493,898
  507,743
  523,085
  539,918
  558,248
  578,089
  599,465
  622,406
  645,244
  671,432
  699,315
  728,948
  760,392
  793,715
  828,988
  866,290
  905,704
  947,319
  991,230
  1,037,537
  1,086,349
  1,137,778
  1,191,944
  1,248,974
  1,309,002
  1,372,169
  1,438,623
  1,508,521
Operating income, $m
  22,764
  24,814
  25,423
  26,121
  26,903
  27,771
  28,722
  29,758
  30,880
  32,089
  33,385
  36,476
  37,957
  39,533
  41,208
  42,986
  44,870
  46,864
  48,972
  51,201
  53,553
  56,035
  58,653
  61,413
  64,320
  67,382
  70,606
  74,000
  77,570
  81,327
  85,279
EBITDA, $m
  32,844
  35,483
  36,299
  37,232
  38,280
  39,440
  40,714
  42,100
  43,601
  45,218
  46,953
  48,810
  50,791
  52,900
  55,142
  57,520
  60,041
  62,709
  65,531
  68,513
  71,661
  74,982
  78,485
  82,178
  86,068
  90,165
  94,479
  99,020
  103,799
  108,825
  114,113
Interest expense (income), $m
  2,351
  2,059
  2,171
  2,305
  2,459
  2,632
  2,823
  3,033
  3,262
  3,509
  3,776
  4,062
  4,368
  4,694
  5,042
  5,412
  5,804
  6,219
  6,659
  7,125
  7,616
  8,135
  8,683
  9,260
  9,869
  10,510
  11,186
  11,897
  12,646
  13,434
  14,262
Earnings before tax, $m
  20,497
  22,755
  23,253
  23,815
  24,444
  25,139
  25,899
  26,725
  27,619
  28,579
  29,610
  32,415
  33,589
  34,839
  36,166
  37,574
  39,066
  40,644
  42,313
  44,076
  45,937
  47,900
  49,971
  52,152
  54,451
  56,872
  59,420
  62,102
  64,925
  67,894
  71,016
Tax expense, $m
  6,204
  6,144
  6,278
  6,430
  6,600
  6,788
  6,993
  7,216
  7,457
  7,716
  7,995
  8,752
  9,069
  9,406
  9,765
  10,145
  10,548
  10,974
  11,425
  11,901
  12,403
  12,933
  13,492
  14,081
  14,702
  15,355
  16,043
  16,768
  17,530
  18,331
  19,174
Net income, $m
  13,643
  16,611
  16,975
  17,385
  17,844
  18,351
  18,906
  19,510
  20,162
  20,863
  21,615
  23,663
  24,520
  25,432
  26,401
  27,429
  28,518
  29,670
  30,889
  32,175
  33,534
  34,967
  36,478
  38,071
  39,749
  41,516
  43,377
  45,335
  47,395
  49,562
  51,842

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
  196,041
  200,549
  205,704
  211,490
  217,902
  224,937
  232,597
  240,890
  249,823
  259,411
  269,668
  280,613
  292,266
  304,650
  317,792
  331,719
  346,461
  362,050
  378,522
  395,915
  414,266
  433,620
  454,020
  475,513
  498,151
  521,986
  547,073
  573,473
  601,246
  630,459
Adjusted assets (=assets-cash), $m
  192,223
  196,041
  200,549
  205,704
  211,490
  217,902
  224,937
  232,597
  240,890
  249,823
  259,411
  269,668
  280,613
  292,266
  304,650
  317,792
  331,719
  346,461
  362,050
  378,522
  395,915
  414,266
  433,620
  454,020
  475,513
  498,151
  521,986
  547,073
  573,473
  601,246
  630,459
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
  117,455
  120,156
  123,244
  126,711
  130,553
  134,768
  139,357
  144,326
  149,678
  155,422
  161,568
  168,125
  175,107
  182,527
  190,401
  198,745
  207,577
  216,917
  226,786
  237,207
  248,202
  259,797
  272,020
  284,897
  298,460
  312,741
  327,771
  343,588
  360,228
  377,731
Working capital, $m
  -9,239
  -12,390
  -12,675
  -13,000
  -13,366
  -13,771
  -14,216
  -14,700
  -15,224
  -15,789
  -16,395
  -17,043
  -17,735
  -18,471
  -19,254
  -20,084
  -20,965
  -21,896
  -22,882
  -23,923
  -25,022
  -26,182
  -27,405
  -28,694
  -30,052
  -31,483
  -32,990
  -34,575
  -36,243
  -37,999
  -39,845
Total debt, $m
  45,938
  44,300
  47,046
  50,184
  53,708
  57,613
  61,898
  66,563
  71,613
  77,053
  82,892
  89,139
  95,804
  102,901
  110,443
  118,446
  126,928
  135,905
  145,400
  155,431
  166,023
  177,199
  188,985
  201,409
  214,499
  228,285
  242,800
  258,079
  274,156
  291,070
  308,860
Total liabilities, $m
  121,027
  119,389
  122,135
  125,273
  128,797
  132,702
  136,987
  141,652
  146,702
  152,142
  157,981
  164,228
  170,893
  177,990
  185,532
  193,535
  202,017
  210,994
  220,489
  230,520
  241,112
  252,288
  264,074
  276,498
  289,588
  303,374
  317,889
  333,168
  349,245
  366,159
  383,949
Total equity, $m
  77,798
  76,652
  78,415
  80,430
  82,693
  85,200
  87,950
  90,946
  94,188
  97,681
  101,430
  105,440
  109,720
  114,276
  119,118
  124,257
  129,702
  135,466
  141,562
  148,002
  154,803
  161,978
  169,545
  177,522
  185,926
  194,777
  204,096
  213,906
  224,228
  235,087
  246,509
Total liabilities and equity, $m
  198,825
  196,041
  200,550
  205,703
  211,490
  217,902
  224,937
  232,598
  240,890
  249,823
  259,411
  269,668
  280,613
  292,266
  304,650
  317,792
  331,719
  346,460
  362,051
  378,522
  395,915
  414,266
  433,619
  454,020
  475,514
  498,151
  521,985
  547,074
  573,473
  601,246
  630,458
Debt-to-equity ratio
  0.590
  0.580
  0.600
  0.620
  0.650
  0.680
  0.700
  0.730
  0.760
  0.790
  0.820
  0.850
  0.870
  0.900
  0.930
  0.950
  0.980
  1.000
  1.030
  1.050
  1.070
  1.090
  1.110
  1.130
  1.150
  1.170
  1.190
  1.210
  1.220
  1.240
  1.250
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
  16,611
  16,975
  17,385
  17,844
  18,351
  18,906
  19,510
  20,162
  20,863
  21,615
  23,663
  24,520
  25,432
  26,401
  27,429
  28,518
  29,670
  30,889
  32,175
  33,534
  34,967
  36,478
  38,071
  39,749
  41,516
  43,377
  45,335
  47,395
  49,562
  51,842
Depreciation, amort., depletion, $m
  10,080
  10,670
  10,876
  11,112
  11,376
  11,670
  11,991
  12,342
  12,721
  13,130
  13,568
  12,333
  12,834
  13,367
  13,933
  14,534
  15,171
  15,846
  16,559
  17,312
  18,107
  18,947
  19,832
  20,765
  21,748
  22,783
  23,873
  25,021
  26,228
  27,498
  28,834
Funds from operations, $m
  37,720
  27,281
  27,850
  28,497
  29,221
  30,021
  30,898
  31,851
  32,882
  33,993
  35,183
  35,996
  37,354
  38,799
  40,335
  41,964
  43,689
  45,516
  47,447
  49,487
  51,641
  53,914
  56,310
  58,836
  61,497
  64,300
  67,250
  70,355
  73,623
  77,061
  80,676
Change in working capital, $m
  6,190
  -243
  -285
  -326
  -366
  -405
  -445
  -484
  -524
  -565
  -606
  -648
  -692
  -736
  -783
  -831
  -880
  -932
  -985
  -1,041
  -1,099
  -1,160
  -1,223
  -1,289
  -1,358
  -1,431
  -1,506
  -1,586
  -1,668
  -1,755
  -1,846
Cash from operations, $m
  31,530
  27,524
  28,135
  28,823
  29,586
  30,426
  31,342
  32,335
  33,407
  34,557
  35,789
  36,644
  38,046
  39,536
  41,117
  42,794
  44,570
  46,448
  48,432
  50,528
  52,741
  55,074
  57,533
  60,125
  62,856
  65,730
  68,756
  71,941
  75,291
  78,816
  82,522
Maintenance CAPEX, $m
  0
  -8,805
  -8,966
  -9,172
  -9,408
  -9,673
  -9,966
  -10,288
  -10,638
  -11,017
  -11,426
  -11,864
  -12,333
  -12,834
  -13,367
  -13,933
  -14,534
  -15,171
  -15,846
  -16,559
  -17,312
  -18,107
  -18,947
  -19,832
  -20,765
  -21,748
  -22,783
  -23,873
  -25,021
  -26,228
  -27,498
New CAPEX, $m
  -10,619
  -2,108
  -2,701
  -3,088
  -3,467
  -3,842
  -4,215
  -4,590
  -4,968
  -5,352
  -5,744
  -6,145
  -6,557
  -6,982
  -7,420
  -7,874
  -8,344
  -8,832
  -9,340
  -9,869
  -10,420
  -10,995
  -11,595
  -12,222
  -12,878
  -13,563
  -14,280
  -15,031
  -15,817
  -16,640
  -17,502
Cash from investing activities, $m
  -13,987
  -10,913
  -11,667
  -12,260
  -12,875
  -13,515
  -14,181
  -14,878
  -15,606
  -16,369
  -17,170
  -18,009
  -18,890
  -19,816
  -20,787
  -21,807
  -22,878
  -24,003
  -25,186
  -26,428
  -27,732
  -29,102
  -30,542
  -32,054
  -33,643
  -35,311
  -37,063
  -38,904
  -40,838
  -42,868
  -45,000
Free cash flow, $m
  17,543
  16,611
  16,468
  16,562
  16,712
  16,912
  17,162
  17,458
  17,800
  18,187
  18,619
  18,635
  19,155
  19,720
  20,330
  20,987
  21,691
  22,444
  23,247
  24,101
  25,008
  25,971
  26,991
  28,071
  29,213
  30,419
  31,693
  33,037
  34,454
  35,948
  37,522
Issuance/(repayment) of debt, $m
  -3,591
  2,282
  2,746
  3,139
  3,524
  3,905
  4,284
  4,665
  5,050
  5,441
  5,839
  6,247
  6,665
  7,097
  7,542
  8,003
  8,481
  8,978
  9,494
  10,032
  10,592
  11,176
  11,786
  12,424
  13,090
  13,786
  14,515
  15,278
  16,077
  16,914
  17,791
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
  2,282
  2,746
  3,139
  3,524
  3,905
  4,284
  4,665
  5,050
  5,441
  5,839
  6,247
  6,665
  7,097
  7,542
  8,003
  8,481
  8,978
  9,494
  10,032
  10,592
  11,176
  11,786
  12,424
  13,090
  13,786
  14,515
  15,278
  16,077
  16,914
  17,791
Total cash flow (excl. dividends), $m
  4,378
  18,892
  19,214
  19,701
  20,235
  20,817
  21,446
  22,123
  22,850
  23,628
  24,458
  24,881
  25,820
  26,817
  27,873
  28,990
  30,173
  31,422
  32,741
  34,132
  35,600
  37,147
  38,778
  40,495
  42,303
  44,206
  46,208
  48,315
  50,531
  52,862
  55,312
Retained Cash Flow (-), $m
  2,748
  -1,536
  -1,763
  -2,015
  -2,262
  -2,507
  -2,751
  -2,995
  -3,242
  -3,493
  -3,749
  -4,010
  -4,279
  -4,556
  -4,842
  -5,138
  -5,445
  -5,764
  -6,096
  -6,441
  -6,800
  -7,176
  -7,567
  -7,976
  -8,404
  -8,851
  -9,319
  -9,809
  -10,322
  -10,859
  -11,422
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
 
  20,038
  17,451
  17,686
  17,973
  18,310
  18,695
  19,128
  19,608
  20,135
  20,709
  20,871
  21,541
  22,260
  23,030
  23,852
  24,727
  25,658
  26,645
  27,692
  28,800
  29,972
  31,210
  32,518
  33,899
  35,354
  36,889
  38,506
  40,209
  42,002
  43,890
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
 
  19,194
  15,944
  15,343
  14,734
  14,111
  13,470
  12,809
  12,126
  11,423
  10,700
  9,747
  9,018
  8,282
  7,545
  6,814
  6,095
  5,397
  4,726
  4,091
  3,497
  2,949
  2,452
  2,008
  1,618
  1,281
  997
  761
  569
  416
  298
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. operates retail stores in various formats worldwide. It operates through three segments: Walmart U.S., Walmart International, and Sam’s Club. The company operates discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, cash and carry stores, home improvement stores, specialty electronics stores, apparel stores, drug stores, convenience stores, and membership-only warehouse clubs; and retail Websites, such as walmart.com and samsclub.com. It offers grocery products, including meat, produce, natural and organics, deli and bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages, floral and dry grocery, as well as consumables, such as health and beauty aids, baby products, household chemicals, paper goods, and pet supplies; and health and wellness products, which include pharmacy, optical services, clinical services, over-the-counter drugs, and other medical products. The company also provides electronics, toys, cameras and supplies, photo processing services, cellular phones, cellular service plan contracts and prepaid service, movies, music, video games, and books; stationery, automotive, hardware and paint, and sporting goods, as well as fabrics, crafts, and seasonal merchandise; apparel for women, girls, men, boys, and infants, as well as shoes, jewelry, and accessories; and home furnishings, housewares and small appliances, bedding, home decor, outdoor living, and horticulture products. The company also provides fuel and financial services and related products, including money orders, prepaid cards, wire transfers, money transfers, check cashing, and bill payment. In addition, it offers brand name merchandise, including hardgoods, softgoods, and selected private-label items, such as Member’s Mark. As of June 20, 2016, it operated 11,527 stores under 63 banners in 28 countries and e-commerce Websites in 11 countries. Wal-Mart Stores, Inc. was founded in 1945 and is headquartered in Bentonville, Arkansas.

FINANCIAL RATIOS  of  Wal-Mart Stores (WMT)

Valuation Ratios
P/E Ratio 17.7
Price to Sales 0.5
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 7.7
Price to Free Cash Flow 11.6
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% 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 3038.47 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 $241.0 billion.

RELATED COMPANIES Price Int.Val. Rating
COST Costco Wholesa 157.08 106.18  sell
TGT Target 55.65 69.49  buy
WFM Whole Foods Ma 41.73 28.30  sell
PSMT PriceSmart 81.05 52.48  sell
DG Dollar General 73.82 103.58  buy
JD JD.com ADR 40.13 237.40  str.buy

COMPANY NEWS

▶ Wal-Mart Stores Boosts Full-Year Profit Forecast   [Aug-18-17 07:00PM  Motley Fool]
▶ Here Are Walmart's 10 Biggest Moments   [02:31PM  TheStreet.com]
▶ Walmarts online sales continue upward trend   [11:44AM  Business Insider]
▶ Walmart vs. Amazon: Who's chasing who?   [09:10AM  American City Business Journals]
▶ These Took a Toll on Targets 2Q17 Margins   [09:07AM  Market Realist]
▶ Wal-Mart's Own Brexit   [02:00AM  Bloomberg]
▶ Asian shares slide as Wall Street fall, Spain attack weigh   [Aug-17-17 11:49PM  Associated Press]
▶ Wal-Mart tops Street 2Q forecasts   [10:24PM  Associated Press]
▶ Walmart Is the King of Cheap Food   [08:10PM  TheStreet.com]
▶ Walmarts Grocery Business Is Booming   [05:25PM  Fortune Videos]
▶ Business Highlights   [05:17PM  Associated Press]
▶ Walmart vs. Amazon: Who is chasing who you might be surprised   [03:05PM  American City Business Journals]
▶ What Really Drove Targets Top-Line Beat?   [02:06PM  Market Realist]
▶ Now You Can Sell Walmart   [02:03PM  TheStreet.com]
▶ Target: 5 Reasons to Buy   [11:20AM  Barrons.com]
▶ Targets Strong 2Q, Stock Rose on This   [10:47AM  Market Realist]
▶ The One Secret to Walmart's Rebirth   [10:43AM  TheStreet.com]
▶ Why Wal-Mart is Sinking   [09:36AM  Barrons.com]
▶ Stocks Open Lower As These 2 Dow Names Dive   [09:35AM  Investor's Business Daily]
▶ Why Walmart Earnings Disappointed Investors   [08:05AM  24/7 Wall St.]
▶ Walmart beats on earnings as online sales surge   [07:30AM  Business Insider]
▶ [$$] Wal-Mart Earnings: What to Watch   [03:42AM  The Wall Street Journal]
Stock chart of WMT 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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.