Walmart (NYSE: WMT)
Quality Value Investing Research Report | $WMT Updated Coverage | July 2024
Summary:
Walmart Inc. is a dividend-paying large-cap stock in the consumer staples sector’s merchandise retail industry.
A wide economic moat surrounds an enduring, competitive business model but is now underperforming in capital allocation.
Despite below-average enterprise downside risks and low share price risks, the company’s current wealth and the stock’s present value each rate neutral overall.
In this updated research report, QVI reiterates its coverage rating of Walmart and its common shares in the Expanded Real-Time Stock Picks.
When referencing this research report, access your Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the market close on July 3, 2024, and intended for illustration only.
In this updated coverage QVI Research Report, we’ll reexamine the Expanded Real-Time Stock Picks consumer staples sector holding, Walmart Inc., to see if it continues to meet Quality Value Investing’s criteria based on our checklist analysis of the business’s current wealth and the share price’s present value.
Walmart | Company Current Wealth
Value Proposition
Walmart Inc. WMT 0.00%↑ is a dividend-paying large-cap stock in the consumer staples sector’s merchandise retail industry. It was added to the QVI Real-Time Stock Picks on June 27, 2017, at $22.36 cost basis per share, adjusted for splits and dividends.
Walmart Inc. engages in the operation of retail, wholesale, other units, and eCommerce worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club.
It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under Walmart and Walmart Neighborhood Market brands; membership-only warehouse clubs; e-commerce websites, such as Compras en línea | Walmart online México, Online Shopping Canada: Everyday Low Prices at Walmart-ca!, flipkart-com, PhonePe, and other sites; and mobile commerce applications.
The company was formerly known as Wal-Mart Stores, Inc. and changed its name to Walmart Inc. in February 2018. Walmart was founded in 1945 and is based in Bentonville, Arkansas, USA.
Economic Moat
Morningstar assigns Walmart a wide moat rating weighted toward its ubiquitous brand, low-pricing model, and cost advantages.
QVI’s Value Proposition Elevator Pitch for WMT:
Walmart, love it or hate it, is an enduring American institution.
QVI’s value proposition rating for Walmart: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the chart below, Walmart’s trailing three-year annualized revenue growth was single-digit positive, outperforming the consumer staples sector’s +2.55% median growth. The company’s topline growth was positive +5.68% for the most recently reported twelve months.
Further down the income statement, Walmart’s three-year, low-single-digits positive net profit margin underperformed the sector’s median net margin of +5.11 %.
Returns on Equity and Invested Capital
Walmart’s senior management produced a three-year double-digit return on equity, or ROE, in line with QVI’s targeted threshold while beating the sector’s median ROE of +11.24%.
Stock buyback programs often elevate ROE. For example, from January 2023 to April 2024, Walmart repurchased $5 billion of its outstanding shares. Are they buying back shares at a value price for shareholders? The valuation section later in this report will address that question.
Walmart’s three-year return on invested capital, or ROIC, was below QVI’s threshold but ahead of the sector’s median ROIC of +6.91%. In addition, WMT’s ROIC exceeded its weighted average cost of capital, or WACC, of 6.43%, demonstrating that its senior executives are merely adequate capital allocators. (Source of WACC: GuruFocus)
QVI’s business fundamentals rating for Walmart: Neutral.
Next, we’ll look at the company’s returns on management chart, enterprise downsize risks, the stock price’s present value, share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
Disclosure: At this writing, I/we had no beneficial position in WMT common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in their own research or due diligence and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.