Key takeaways
View moreWalmart's current valuation appears slightly overvalued primarily due to its high EV/EBITDA ratio (19.45) compared to the industry average (7.85). However, this is partially justified by the company's strong profitability metrics, successful omni-channel strategy, and growth prospects in eCommerce and international markets. The slight overvaluation reflects the market pricing in an optimistic scenario, leaving limited room for upside given the existing risks.
- Walmart's profitability metrics (gross, net, and EBITDA margins) consistently exceed industry averages, indicating strong operational efficiency.
- The company's current ratio of 0.78, below the industry average of 1.45, raises concerns about short-term liquidity.
- Net operating cash flow has decreased from $12.11 billion (2024-07-31) to $5.41 billion (2025-04-30), signaling potential challenges in core business operations.
- Walmart's debt-to-equity ratio of 80.20% is lower than the industry average of 204.86%, suggesting a more conservative capital structure.
- The company's strategic focus on omni-channel initiatives and eCommerce growth is evident in its investments and comparable sales growth.
- Legal and regulatory risks, particularly opioid-related litigation, remain a significant threat, with $3.3 billion accrued and substantially paid out by January 2025.
- Walmart has outperformed the Consumer Discretionary Select Sector SPDR Fund (XLY) over the past three years, with a 3-year performance of 149.15% compared to XLY's 56.86%.
- The acquisition of VIZIO Holding Corp. for $1.9 billion expands Walmart's consumer electronics and data capabilities, presenting a growth opportunity.
- Management's focus on tariff management and diversification of revenue streams is crucial for maintaining profitability in a dynamic economic environment.
- The Enterprise Value to EBITDA ratio, ranging from 14.73 to 19.76, exceeds the industry average of 7.85, indicating a potentially higher valuation relative to earnings.
Evaluation summary
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Company Overview:
- Walmart, Inc. is a global retail and wholesale business offering a wide assortment of merchandise and services at everyday low prices. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club.
- Walmart U.S. operates as a mass merchandiser of consumer products through Walmart and Walmart Neighborhood Market brands, including walmart.com. Walmart International includes wholly-owned subsidiaries in Canada, Chile, China, and Africa, and majority-owned subsidiaries in India, as well as Mexico and Central America. Sam's Club manages membership-only warehouse clubs and operates samsclub.com.
- For comparative analysis, the company's performance is benchmarked against the Consumer Discretionary Select Sector SPDR Fund (XLY) and industry peers Target Corp. (TGT) and Costco Wholesale Corp. (COST).
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Financial Performance:
- Walmart's sales revenue has shown an upward trend over the past four quarters, with sales of $165.61 billion for the quarter ending April 30, 2025, compared to $169.34 billion for the quarter ending July 31, 2024. The highest revenue was $180.55 billion for the quarter ending January 31, 2025.
- Gross profit margin has remained relatively stable, ranging from 24.58% to 25.11% over the past four quarters, exceeding the industry average of 24.02%. For the quarter ending April 30, 2025, the gross profit margin was 24.94%.
- Net profit margin has also been consistent, ranging from 2.66% to 2.91% over the past four quarters, surpassing the industry average of 2.03%. The net profit margin for the quarter ending April 30, 2025, was 2.71%.
- Return on Assets (ROA) for the quarter ending April 30, 2025, was 7.29%, higher than the industry average of 4.78%. Return on Equity (ROE) was 22.80%, also above the industry average of 18.19%. Return on Invested Capital (ROIC) was 13.68%, significantly higher than the industry average of 6.95%.
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Operational Efficiency:
- Total current assets decreased from $86.94 billion for the quarter ending October 31, 2024, to $80.25 billion for the quarter ending April 30, 2025. Total current liabilities increased from $95.26 billion for the quarter ending July 31, 2024, to $102.92 billion for the quarter ending April 30, 2025.
- Working capital has been negative, with a value of -$22.67 billion for the quarter ending April 30, 2025. This indicates potential short-term liquidity challenges.
- Net operating cash flow decreased from $12.11 billion for the quarter ending July 31, 2024, to $5.41 billion for the quarter ending April 30, 2025. Net investing cash flow has been consistently negative, indicating a net outflow of cash for investment activities.
- Free cash flow to equity was $425 million for the quarter ending April 30, 2025, a significant decrease from $6.28 billion for the quarter ending July 31, 2024.
- Total capital expenditure was $4.99 billion for the quarter ending April 30, 2025, compared to depreciation, depletion, and amortization of $3.37 billion.
- Cash dividends paid were $1.88 billion for the quarter ending April 30, 2025. The company also engaged in share repurchases, with a change in capital stock of -$4.56 billion for the same quarter.
- The current ratio was 0.78 for the quarter ending April 30, 2025, below the industry average of 1.45, indicating potential liquidity concerns. The quick ratio was 0.22, also below the industry average of 0.71.
- The debt-to-equity ratio was 80.20% for the quarter ending April 30, 2025, lower than the industry average of 204.86%.
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Growth Opportunities:
- Walmart is focused on growth through omni-channel initiatives, margin improvement through productivity and business mix, and enhancing returns on capital, as highlighted in SEC filings.
- The company is investing heavily in eCommerce, technology, supply chain, and store/club remodels to support its long-term strategy.
- Comparable sales growth of 4.8% and 4.9% in fiscal 2025 and 2024, respectively, driven by strong performance in the U.S. segments, indicates successful market expansion.
- The acquisition of VIZIO Holding Corp. in December 2024 for $1.9 billion expands the company's consumer electronics and data capabilities.
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Recent Developments and Market Sentiment:
- The earnings call for 2026Q1 highlighted that eCommerce profitability is a key milestone, with 22% global growth.
- Tariff management is a major focus, and Walmart is diversifying sourcing and working with suppliers to mitigate the impact.
- Diversification of revenue streams through advertising and membership revenue is critical for flexibility in growth initiatives.
- Management expressed confidence in the company's strategy and omnichannel capabilities, emphasizing the importance of managing inventory and controlling costs in the face of potential tariff impacts.
- Analysts are focused on understanding eCommerce profitability drivers, investment strategies, consumer health trends, and the impact of tariffs.
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Risks and Threats:
- Key risks identified in company-specific risk assessments include failure to successfully execute the omni-channel strategy and effectively invest in eCommerce, technology, and automation.
- Inability to anticipate and respond to changing consumer preferences and industry trends poses a threat.
- Exposure to macroeconomic conditions, supply chain disruptions, and currency exchange rate fluctuations can impact financial performance.
- Cybersecurity threats and data privacy/security compliance risks are ongoing concerns.
- Legal and regulatory risks, including opioid-related litigation and investigations, remain a significant threat. The company accrued $3.3 billion for opioid-related claims, which were substantially paid out by January 2025.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio ranges from 14.73 to 19.76 over the past four quarters, exceeding the industry average of 7.85.
- The Enterprise Value to Sales ratio ranges from 0.92 to 1.25, also higher than the industry average of 0.58.
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Price Performance:
- Walmart, Inc. (WMT) has generally outperformed the Consumer Discretionary Select Sector SPDR Fund (XLY) over the past three years.
- As of the latest data, WMT has significantly outperformed XLY across various timeframes, including Year-To-Date (YTD), 1 Week, 3 Months, 6 Months, 1 Year, 2 Years, and 3 Years.
- WMT's 3-year performance stands at 149.15% compared to XLY's 56.86%, indicating a substantial outperformance of 92.29%.
- Compared to peers, WMT has shown mixed performance. Over the past year, WMT has significantly outperformed Target (TGT) with returns of 51.65% compared to TGT's -34.78%. However, when looking at the past two and three years, WMT's performance, while positive (102.31% and 149.15% respectively), has been less than Costco (COST) (118.18% and 151.71% respectively).
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Future Outlook:
- Management expects FY26 CapEx to be in the range of 3% to 3.5% of sales and will continue to be opportunistic with share buybacks.
- The company reiterated its long-term financial framework to grow annual sales about 4% and operating income faster than sales.
- Q2 sales growth is expected to be in the range of 3.5% to 4.5% on a constant currency basis.
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Summary:
- Walmart demonstrates strong profitability with gross, net, and EBITDA margins above industry averages. The company is strategically focused on omni-channel initiatives and eCommerce growth.
- Weaknesses include potential liquidity concerns due to a low current ratio and decreasing operating cash flow. The company faces macroeconomic headwinds, intense competition, and legal risks.
- Opportunities lie in continued investments in eCommerce, technology, and supply chain improvements. The acquisition of VIZIO and diversification of revenue streams through advertising and membership fees present growth avenues.
- Threats include failure to execute the omni-channel strategy, macroeconomic conditions, cybersecurity risks, and ongoing legal and regulatory challenges.
- Overall, Walmart exhibits financial stability with a balanced capital structure. However, stakeholders should monitor liquidity, manage costs effectively, and navigate regulatory challenges to ensure sustained growth and profitability. The company's position relative to industry trends and recent developments suggests a need for continuous adaptation and strategic investments.
Price history
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Fundamentals
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Insights
- Walmart demonstrates strong profitability with gross, net, and EBITDA margins above industry averages, but net income growth is decelerating.
- The company faces potential liquidity concerns due to a low current ratio and decreasing cash reserves, despite efficient inventory management.
- While primarily equity-financed, increasing short-term debt and decreasing operating cash flow warrant close monitoring for financial stability.
- Strategic investments in long-term assets and omni-channel initiatives are expected to drive future growth, but capital expenditure efficiency needs evaluation.
- Unusual expenses can significantly impact net income, requiring careful monitoring.
Analysis
- Revenue
- Sales revenue has shown a general upward trend, indicating consistent demand.
- The growth rate is decelerating, as the most recent year-over-year growth is lower than the 5-year CAGR.
- The company's focus on omni-channel initiatives is likely contributing to revenue growth.
- Profitability
- Gross, net, and EBITDA margins are above industry averages, demonstrating strong profitability.
- Net income growth is decelerating, with the most recent year-over-year growth rate being lower than the 5-year CAGR.
- Unusual expenses can significantly impact net income, requiring careful monitoring.
- Liquidity
- The current and quick ratios are below the industry average and less than 1, indicating potential liquidity concerns.
- Cash and short-term investments are decreasing, which could impact the company's ability to respond to opportunities or challenges.
- Effective inventory management is suggested by stable inventory levels.
- Solvency
- The debt-to-equity ratio is moderate and below the industry average, suggesting a balanced capital structure.
- Long-term debt is decreasing slightly, indicating a focus on deleveraging.
- The company is primarily financed by equity, providing financial stability.
- Operational Efficiency
- Stable inventory levels suggest efficient asset utilization.
- Increasing accounts receivable may indicate potential issues with collections or more sales on credit.
- Capital expenditure efficiency should be evaluated to ensure that investments are generating adequate returns.
- Cash Flow Analysis - Net operating cash flow has generally decreased, indicating potential challenges in core business operations. - Net investing cash flow has been consistently negative, indicating a net outflow of cash for investment activities. - Cash dividends paid have steadily increased, reflecting a commitment to shareholder returns.
- Risk Factors
- The low current ratio and increasing short-term debt are potential areas of concern.
- Decreasing operating cash flow raises concerns about short-term liquidity.
- Negative free cash flow indicates potential challenges in meeting long-term debt obligations.
- Future Outlook
- Continued investments in long-term assets are expected to drive future growth.
- Monitoring the current ratio and short-term debt levels will be crucial to ensure financial stability.
- The impact of deferred tax liabilities on future earnings should be closely watched.
- Profitability
Financial statements
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Public filings
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- Walmart continues to execute on its omni-channel strategy, investing heavily in eCommerce, technology, and automation to drive growth and improve efficiency, though the costs of these initiatives may pressure short-term profitability.
- The company faces intense competition from both traditional and emerging retail players, as well as evolving consumer preferences, which require Walmart to continuously adapt its offerings and customer experience.
- Macroeconomic factors like inflation, supply chain disruptions, and currency fluctuations pose significant risks that can impact Walmart's financial performance and operations.
- Regulatory compliance, particularly around data privacy, worker classification, and environmental/sustainability issues, is an increasing challenge that requires ongoing attention and investment.
- Walmart's legal and regulatory exposure, especially related to the opioid crisis, remains a major risk that could result in material liabilities and reputational damage if not properly managed.
- Despite these risks, Walmart has demonstrated strong financial performance, with consistent comparable sales growth, gross margin expansion, and disciplined capital allocation that have driven shareholder returns.
Core Business and Operations:
- Walmart Inc. is a global retail and wholesale company operating through three main segments: Walmart U.S., Walmart International, and Sam's Club U.S.
- Walmart U.S. is the largest segment, operating over 4,600 stores and clubs in the U.S. and offering a wide range of merchandise including grocery, general merchandise, health and wellness, and eCommerce.
- Walmart International operates over 5,500 stores and clubs across 18 countries, with a focus on retail, wholesale, and eCommerce offerings.
- Sam's Club U.S. operates 600 membership-only warehouse clubs in the U.S. and Puerto Rico, offering grocery, general merchandise, health and wellness, and fuel.
- Key competitors include other discount, department, drug, dollar, variety, and specialty stores, as well as eCommerce and omni-channel retailers.
Industry and Market Trends:
- The retail industry is highly competitive, with increasing competition from eCommerce and omni-channel players, as well as evolving consumer preferences and shopping behaviors.
- Macroeconomic factors like inflation, interest rates, currency fluctuations, and supply chain disruptions can significantly impact the company's operations and financial performance.
- Regulatory changes, particularly related to data privacy, worker classification, and environmental/sustainability requirements, pose compliance risks.
Recent Events:
- Acquired VIZIO Holding Corp. in December 2024 for $1.9 billion, expanding the company's consumer electronics and data capabilities.
- Sold the company's equity investment in JD.com for $3.6 billion in August 2024.
- Completed the buyout of noncontrolling interest shareholders in Massmart and increased ownership in PhonePe over the past few years.
- Entered into settlement agreements to resolve opioid-related claims, with $3.3 billion accrued and substantially paid out by January 2025.
Risk Factors:
- Failure to successfully execute omni-channel strategy and effectively invest in eCommerce, technology, and automation.
- Inability to anticipate and respond to changing consumer preferences and industry trends.
- Exposure to macroeconomic conditions, supply chain disruptions, and currency exchange rate fluctuations.
- Cybersecurity threats and data privacy/security compliance risks.
- Legal and regulatory risks, including opioid-related litigation and investigations.
Legal Matters:
- Ongoing opioid-related litigation, including the national multidistrict litigation (MDL) and other state/federal court cases.
- DOJ opioid civil litigation and related securities class actions and shareholder derivative suits.
- Asda equal value claims in the UK and various other legal proceedings related to the company's operations.
- Investigations and litigation regarding the company's money transfer agent services and driver platform.
- Antitrust matters in Mexico and India related to the company's subsidiaries.
Management's Discussion and Analysis:
- Focused on growth through omni-channel initiatives, margin improvement through productivity and business mix, and enhancing returns on capital.
- Comparable sales growth of 4.8% and 4.9% in fiscal 2025 and 2024, respectively, driven by strong performance in the U.S. segments.
- Gross profit rate improvements and operating expense leverage contributed to operating income growth.
- Significant investments in eCommerce, technology, supply chain, and store/club remodels to support long-term strategy.
- Strong cash flow generation and disciplined capital allocation, including share repurchases and dividend increases.
Earnings calls
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Earnings Report 2026Q1 (2025-05-15)
Key takeaways
- eCommerce Profitability is a Key Milestone: Achieving profitability in eCommerce, both in the U.S. and globally, is a significant achievement that validates Walmart's investments in its omnichannel strategy and supply chain infrastructure.
- Tariff Management is a Major Focus: The impact of tariffs is a major concern, and Walmart's ability to manage costs and mitigate the impact will be crucial for maintaining profitability and competitiveness.
- Diversification of Revenue Streams is Critical: The growth in advertising and membership revenue is helping to diversify Walmart's income streams and provide flexibility to invest in growth initiatives.
- Inventory Management is Paramount: Effective inventory management is essential for navigating the current environment and avoiding the risk of markdowns and excess inventory.
- Consumer Behavior is Evolving: Walmart is closely monitoring consumer behavior and adapting its assortment and services to meet changing preferences and shopping habits.
- Long-Term Strategy Remains Intact: Despite the short-term challenges, Walmart remains confident in its long-term strategy and its ability to grow sales and operating income.
Focus of management’s prepared remarks
- Strong Q1 Performance: The company delivered a good first quarter, exceeding expectations on the bottom line, driven by transaction and unit growth rather than inflation.
- Omnichannel Strategy: The omnichannel capabilities are strong, with a focus on improving assortment, delivery speed, and scaling newer businesses.
- eCommerce Growth and Profitability: eCommerce grew 22% globally, with each segment delivering growth of at least 20%. The company achieved eCommerce profitability globally and in the U.S.
- Tariff Management: The company is positioned to manage cost pressure from tariffs effectively, although higher tariffs will result in higher prices. They are diversifying sourcing and working with suppliers to mitigate the impact.
- U.S. Manufacturing Support: Over two-thirds of what Walmart sells in the U.S. is made, assembled, or grown domestically. The company is committed to adding $350 billion in incremental U.S. volume over 10 years and supporting small businesses through the Grow With Us program.
- Inventory Management: Inventory is in good shape, which is crucial for navigating tariff impacts. The company is focused on managing inventory effectively and partnering with suppliers to adjust quantities.
- Diversified Profit Streams: The company is diversifying profit streams through eCommerce, marketplace, membership, and advertising, providing room to absorb costs.
- Long-Term Financial Framework: The company reiterated its long-term financial framework to grow annual sales about 4% and operating income faster than sales.
- Capital Allocation: The company expects FY26 CapEx to be in the range of 3% to 3.5% of sales and will continue to be opportunistic with share buybacks.
Focus of the analyst Q&A
- eCommerce Profitability:
- What factors contributed to achieving profitability in the eCommerce business?
- What is the outlook for eCommerce margins relative to the rest of the business?
- What are the key drivers for further improvement in eCommerce profitability?
- Investment Strategy:
- Why not increase investments even more in the current environment to gain market share?
- How is the balance being struck between investment and growing profits?
- Consumer Health:
- What are the trends in consumer spending among different income cohorts?
- Is the lower-end consumer showing signs of weakness or trading down?
- How is Walmart adapting to changing consumer preferences and shopping behaviors?
- Capital Allocation:
- What is the outlook for CapEx spending, particularly regarding automation investments?
- What is the strategy for share buybacks going forward?
- Walmart Connect and Advertising:
- What is driving the growth in Walmart Connect?
- What are the initial learnings from integrating VIZIO?
- Tariff Impact and Mitigation:
- What level of tariffs would be considered "elevated" and pose a downside risk?
- Can Walmart fully mitigate the impact of tariffs over the long term?
- How are tariffs impacting inventory planning and pricing strategies?
- Marketplace Performance:
- How is the tariff situation impacting sellers on the marketplace?
- What are the strategic priorities for the marketplace in terms of seller additions and assortment expansion?
- Membership and Other Revenue:
- How can the growth rates in advertising and membership be reconciled with the growth in the "membership and other" line in the P&L?
- Health and Wellness:
- How sustainable is the momentum in the health and wellness category?
- How is the pharmacy rollout trending, and is it driving new customer acquisition?
- General Merchandise:
- What is the outlook for deflation versus inflation and tariffs in general merchandise?
- Are there significant differences in the mix of general merchandise for in-store versus eCommerce?
Summary
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Financial Performance
Walmart reported a strong Q1 FY26, with sales up 4% and profit up 3% in constant currency. International sales grew by 7.8%. Sam's U.S. comp sales increased by 6.7% (excluding fuel), and Walmart U.S. comp sales grew by 4.5%. eCommerce grew 22% globally. Adjusted EPS of $0.61 exceeded guidance. The company reiterated its long-term financial framework to grow annual sales about 4% and operating income faster than sales.
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Revenue Drivers
Revenue growth was driven by strong eCommerce performance across all segments and transaction and unit growth. Walmart U.S. saw momentum in grocery sales and high-teens growth in health and wellness. International growth was fueled by China and Flipkart. Sam's Club U.S. saw strong growth in transactions and Member's Mark. eCommerce growth was attributed to increased delivery speed and convenience.
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Profit Margins and Cost Management
Consolidated gross margin increased 12 basis points, driven by better-than-expected results at Walmart U.S., which saw a 25 basis point increase. This was attributed to disciplined inventory management, lower markdowns, and improvements in business mix. eCommerce achieved profitability in the U.S. and globally. SG&A expenses deleveraged 6 basis points due to planned investments in associate wages and increased depreciation expense. The company is focused on growing profit faster than sales through diversified income streams like advertising and membership fees.
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Guidance and Outlook
The company reaffirmed its full-year guidance for sales and operating income growth, despite potential impacts from tariffs. Q2 sales growth is expected to be in the range of 3.5% to 4.5% on a constant currency basis, but the company refrained from providing specific operating income guidance for Q2 due to the wide range of possible outcomes related to trade policy. The company expects to manage the cost pressure from tariffs effectively. FY26 CapEx is expected to be in the range of 3% to 3.5% of sales.
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Strategic Initiatives
Key strategic initiatives include expanding omnichannel capabilities, increasing delivery speed, scaling newer businesses like membership and advertising, and diversifying the supply chain. The company is focused on supporting U.S. businesses through initiatives like Grow With Us and the Open Call event. Walmart is also investing in supply chain automation, store growth, remodels, and tech.
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Management Commentary
Management expressed confidence in the company's strategy and omnichannel capabilities. They emphasized the importance of managing inventory and controlling costs in the face of potential tariff impacts. The tone was optimistic, with a focus on long-term growth and shareholder value. CEO Doug McMillon stated, "We're positioned to manage the cost pressure from tariffs as well or better than anyone." CFO John David Rainey noted, "History tells us that when we lean into these times of economic uncertainty, we emerge on the other side as a stronger company."
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Industry and Market Conditions
Management acknowledged the dynamic and fluid operating environment, particularly regarding trade policy and tariffs. They noted that the range of possible outcomes is much greater than when they originally provided their annual guidance. They also highlighted the importance of managing inventory and anticipating demand in a tariff-impacted period. The company believes it is well-positioned to navigate the current environment and gain market share.
Comparative analysis
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Benchmarks (as of 2025-05-20)
Consumer Discretionary Select Sector SPDR Fund (XLY)
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Performance Comparison:
- Walmart, Inc. (WMT) has generally outperformed the Consumer Discretionary Select Sector SPDR Fund (XLY) over the past three years. As of the latest data, WMT has significantly outperformed XLY across various timeframes, including Year-To-Date (YTD), 1 Week, 3 Months, 6 Months, 1 Year, 2 Years, and 3 Years. The only exception is the 1 Month performance, where WMT underperformed XLY. For instance, WMT's 3-year performance stands at 149.15% compared to XLY's 56.86%, indicating a substantial outperformance of 92.29%.
- WMT's performance has been relatively consistent, showing positive returns across most periods, while XLY has experienced more fluctuations, including negative returns in some periods.
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Risk and Return Analysis:
- The annualized returns for WMT have consistently exceeded those of XLY over the 1, 2, and 3-year periods. For example, WMT's 1-year annualized return is 51.65%, significantly higher than XLY's 22.09%.
- WMT has generally exhibited lower annualized volatility compared to XLY, indicating that it is a less risky investment. However, there were periods, such as Q1 2025, where both WMT and XLY experienced high volatility. As of Q2 2025, WMT's volatility was at 34.47% and XLY's was at 41.78%.
- The maximum drawdown for WMT was -25.74% on 2022-06-17, while XLY experienced a larger maximum drawdown of -39.67% on 2022-12-28. This suggests that WMT is more resilient during market downturns compared to XLY.
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Risk-Adjusted Performance:
- WMT has consistently demonstrated higher Sharpe Ratios compared to XLY, indicating that it offers better risk-adjusted returns. As of Q2 2025, WMT's Sharpe Ratio was at 1.93, while XLY's was at 0.94, further highlighting WMT's superior risk-adjusted performance.
- WMT's Beta values have consistently been below 1, indicating that it is less sensitive to market movements compared to XLY, which has Beta values consistently above 1. This suggests that WMT is a more stable investment option. As of Q2 2025, WMT's Beta was at 0.62, while XLY's was at 1.14.
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Overall Assessment:
- Based on the analysis, Walmart, Inc. (WMT) has demonstrated superior performance, lower risk, and better risk-adjusted returns compared to the Consumer Discretionary Select Sector SPDR Fund (XLY). WMT's consistent outperformance, lower volatility, and higher Sharpe Ratios make it a potentially more attractive investment option.
- One significant trend is WMT's ability to maintain lower volatility and smaller drawdowns compared to XLY, indicating its resilience during market downturns. Additionally, WMT's Beta values below 1 suggest that it is less sensitive to market movements, providing stability to investors.
Peers Price History(as of 2025-05-20)
- Performance Comparison:
- Walmart (WMT) has shown mixed performance compared to its peers. Over the past year, WMT has significantly outperformed Target (TGT) with returns of 51.65% compared to TGT's -34.78%. However, when looking at the past two and three years, WMT's performance, while positive (102.31% and 149.15% respectively), has been less than Costco (COST) (118.18% and 151.71% respectively). In the shorter term, YTD, 1 Week, and 1 Month, WMT has underperformed COST, but overperformed TGT in the 1 Month and YTD periods.
- Risk and Return Analysis:
- Walmart's annualized returns for the past one, two, and three years are 51.65%, 42.24%, and 35.57% respectively. These returns are higher than Target's (-34.78%, -16.85%, and -11.21%), but for the two- and three-year periods, they are slightly lower than Costco's (47.71% and 36.03%).
- The annualized volatility data indicates that Target (TGT) generally exhibits higher volatility compared to Walmart (WMT) and Costco (COST). For example, as of 05/20/2025, the annualized volatilities are: WMT at 34.47%, TGT at 48.07%, and COST at 25.88%.
- The maximum drawdown for Walmart (WMT) was -25.74% on 06/17/2022, which is less severe than Target's (TGT) maximum drawdown of -63.52% on 04/08/2025, but similar to Costco's (COST) maximum drawdown of -29.25% on 05/23/2022. This suggests that WMT's risk profile is moderate compared to its peers.
- Risk-Adjusted Performance:
- The Sharpe Ratio for Walmart (WMT) has generally been positive, indicating reasonable risk-adjusted returns. However, Costco (COST) often shows higher Sharpe Ratios, suggesting better risk-adjusted performance. Target (TGT) frequently has negative Sharpe Ratios, indicating poor risk-adjusted returns. As of 05/20/2025, the Sharpe Ratios are: WMT at 1.93, TGT at -0.86, and COST at 1.36.
- The Beta value for Walmart (WMT) is consistently below 1, indicating that it is less sensitive to market movements compared to Target (TGT), which has a Beta around or above 1 for much of the period analyzed. As of 05/20/2025, the Betas are: WMT at 0.62, TGT at 0.81, and COST at 0.6.
- Overall Assessment:
- Walmart (WMT) presents a mixed profile when compared to Target (TGT) and Costco (COST). WMT has shown strong recent performance, particularly over the past year, outperforming both peers in annualized returns. However, its risk-adjusted performance, as indicated by the Sharpe Ratio, is generally lower than Costco's (COST). Target (TGT) appears to be the riskiest of the three, with higher volatility, larger drawdowns, and frequently negative Sharpe Ratios.
- A key trend is that while Walmart (WMT) offers competitive returns, it does not always provide the best risk-adjusted performance compared to Costco (COST). Target (TGT) consistently underperforms both in terms of returns and risk management.
Peers Fundamentals(as of 2025-04-30)
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Market Position and Size:
- Walmart is the largest company in the peer group by a significant margin, with a market capitalization of $782,487.04 million, dwarfing Target's $44,581.8 million and Costco's $460,019.41 million.
- Its revenue of $685,086 million is also substantially higher than Target's $105,881 million and Costco's $264,086 million, reflecting its dominant market share.
- Walmart's EBITDA and Net Income are also significantly greater than its peers, further solidifying its position as the industry leader in terms of size and market presence.
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Profitability and Efficiency:
- Walmart's Gross Profit Margin of 24.88% is slightly above the industry average of 24.02% but lower than Target's 25.7%. Costco's margin is significantly lower at 12.67%.
- Its EBITDA Margin of 6.26% is also above the industry average of 5.5% but lower than Target's 8.37%. Costco's EBITDA margin is 4.57%.
- Walmart's Net Profit Margin of 2.75% is slightly above the industry average of 2.03% but lower than Target's 3.95% and Costco's 2.89%.
- While Walmart maintains reasonable profitability given its size, Target demonstrates superior margins, indicating greater operational efficiency.
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Financial Health and Stability:
- Walmart's Current Ratio of 0.78 and Quick Ratio of 0.22 are below the industry average of 1.45 and 0.71, respectively, suggesting potential liquidity concerns.
- Its Total Debt to Total Equity Ratio of 80.2 is higher than Costco's 31.81 but lower than Target's 127.36 and the industry average of 204.86.
- Walmart's Debt / EBITDA ratio of 1.23 is lower than Target's 1.75 and the industry average of 1.47 but higher than Costco's 0.48.
- Overall, Walmart's liquidity ratios are weak, but its debt levels appear manageable relative to its cash flow generation.
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Valuation and Market Perception:
- Walmart's Enterprise Value To Sales ratio of 1.24 is higher than the industry average of 0.58 but lower than Costco's 1.79.
- Its Enterprise Value To EBITDA ratio of 19.45 is higher than the industry average of 7.85 but lower than Costco's 38.89.
- Walmart's Price To Earnings ratio of 41.91 is higher than Target's 10.78 and the industry average of 21.18 but lower than Costco's 60.53.
- Its Price to Book Ratio of 8.62 is higher than Target's 3.05 and the industry average of 3.11 but lower than Costco's 17.99.
- Walmart's valuation metrics suggest it is reasonably valued compared to its peers and the industry, but not as attractively valued as Target.
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Cash Flow and Capital Management:
- Walmart's Net Operating Cash Flow of $37,605 million is significantly higher than Target's $6,541 million and Costco's $11,965 million.
- Its Total Capital Expenditure of $24,093 million is also much greater than Target's $3,007 million and Costco's $5,040 million.
- Walmart's Free Cash Flow of $13,512 million is greater than Target's $3,534 million and Costco's $6,925 million.
- Walmart generates substantial cash flow, reflecting its large scale of operations, which it uses to fund significant capital expenditures.
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Growth and Future Prospects:
- Walmart's revenue, EBITDA, net income, and EBIT margin growth generally underperform the peer group average.
- Its free cash flow and free cash flow margin growth have been volatile but, on average, outperform the peer group.
- Recent year-over-year growth rates for net income and basic earnings per share are lower than their 5-year CAGRs, indicating a potential deceleration.
- Walmart's future prospects depend on its ability to improve its operational efficiency and drive revenue growth to match its strong cash flow generation.
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Potential for Investment:
- Walmart's scale and cash flow generation are attractive, but its lower profitability margins and weaker growth metrics compared to peers are concerning.
- Investors should carefully weigh its strengths against its weaknesses and consider its valuation relative to its growth potential.
- Target appears to be a more attractive investment based on valuation and growth metrics.
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Key Risks and Considerations:
- Walmart's weak liquidity ratios pose a risk to its short-term financial stability.
- Its underperforming growth metrics raise concerns about its ability to maintain its market position in the long term.
- Increased competition from online retailers and changing consumer preferences could further challenge its growth prospects.
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Overall Assessment:
- Walmart is a dominant player in the retail industry with a massive scale and strong cash flow generation.
- However, its profitability margins are lower than some peers, and its liquidity ratios raise concerns about its short-term financial obligations.
- While its debt levels appear manageable, its growth metrics generally underperform the peer group average.
- Overall, Walmart's financial health is mixed, and its future prospects depend on its ability to improve its operational efficiency and drive revenue growth.
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