Stock Analysis on Net
Stock Analysis on Net

Walmart Inc. (NYSE:WMT)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Walmart Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 9.96%
01 FCFF0 15,190
1 FCFF1 16,180 = 15,190 × (1 + 6.52%) 14,714
2 FCFF2 17,293 = 16,180 × (1 + 6.88%) 14,301
3 FCFF3 18,543 = 17,293 × (1 + 7.23%) 13,945
4 FCFF4 19,950 = 18,543 × (1 + 7.59%) 13,644
5 FCFF5 21,536 = 19,950 × (1 + 7.95%) 13,393
5 Terminal value (TV5) 1,151,084 = 21,536 × (1 + 7.95%) ÷ (9.96% – 7.95%) 715,879
Intrinsic value of Walmart Inc. capital 785,876
Less: Debt and finance lease obligations (fair value) 43,581
Intrinsic value of Walmart Inc. common stock 742,295
 
Intrinsic value of Walmart Inc. common stock (per share) $92.59
Current share price $95.84

Based on: 10-K (reporting date: 2025-01-31).

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Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Walmart Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 768,335 0.95 10.35%
Debt and finance lease obligations (fair value) 43,581 0.05 3.19% = 4.41% × (1 – 27.60%)

Based on: 10-K (reporting date: 2025-01-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 8,016,849,444 × $95.84
= $768,334,850,712.96

   Debt and finance lease obligations (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (23.40% + 25.50% + 33.60% + 25.40% + 33.30% + 24.40%) ÷ 6
= 27.60%

WACC = 9.96%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Walmart Inc., PRAT model

Microsoft Excel
Average Jan 31, 2025 Jan 31, 2024 Jan 31, 2023 Jan 31, 2022 Jan 31, 2021 Jan 31, 2020
Selected Financial Data (US$ in millions)
Interest expense, debt and finance lease 2,728 2,683 2,128 1,994 2,315 2,599
Consolidated net income attributable to Walmart 19,436 15,511 11,680 13,673 13,510 14,881
 
Effective income tax rate (EITR)1 23.40% 25.50% 33.60% 25.40% 33.30% 24.40%
 
Interest expense, debt and finance lease, after tax2 2,090 1,999 1,413 1,488 1,544 1,965
Add: Cash dividends declared 6,688 6,140 6,114 6,152 6,116 6,048
Interest expense (after tax) and dividends 8,778 8,139 7,527 7,640 7,660 8,013
 
EBIT(1 – EITR)3 21,526 17,510 13,093 15,161 15,054 16,846
 
Short-term borrowings 3,068 878 372 410 224 575
Long-term debt due within one year 2,598 3,447 4,191 2,803 3,115 5,362
Finance lease obligations due within one year 800 725 567 511 491 511
Long-term debt, excluding due within one year 33,401 36,132 34,649 34,864 41,194 43,714
Long-term finance lease obligations, excluding due within one year 5,923 5,709 4,843 4,243 3,847 4,307
Total Walmart shareholders’ equity 91,013 83,861 76,693 83,253 80,925 74,669
Total capital 136,803 130,752 121,315 126,084 129,796 129,138
Financial Ratios
Retention rate (RR)4 0.59 0.54 0.43 0.50 0.49 0.52
Return on invested capital (ROIC)5 15.73% 13.39% 10.79% 12.02% 11.60% 13.04%
Averages
RR 0.51
ROIC 12.76%
 
FCFF growth rate (g)6 6.52%

Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-01-31).

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2025 Calculations

2 Interest expense, debt and finance lease, after tax = Interest expense, debt and finance lease × (1 – EITR)
= 2,728 × (1 – 23.40%)
= 2,090

3 EBIT(1 – EITR) = Consolidated net income attributable to Walmart + Interest expense, debt and finance lease, after tax
= 19,436 + 2,090
= 21,526

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [21,526 – 8,778] ÷ 21,526
= 0.59

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 21,526 ÷ 136,803
= 15.73%

6 g = RR × ROIC
= 0.51 × 12.76%
= 6.52%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (811,916 × 9.96% – 15,190) ÷ (811,916 + 15,190)
= 7.95%

where:

Total capital, fair value0 = current fair value of Walmart Inc. debt and equity (US$ in millions)
FCFF0 = the last year Walmart Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Walmart Inc. capital

FCFF growth rate (g) forecast

Walmart Inc., H-model

Microsoft Excel
Year Value gt
1 g1 6.52%
2 g2 6.88%
3 g3 7.23%
4 g4 7.59%
5 and thereafter g5 7.95%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 6.52% + (7.95% – 6.52%) × (2 – 1) ÷ (5 – 1)
= 6.88%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 6.52% + (7.95% – 6.52%) × (3 – 1) ÷ (5 – 1)
= 7.23%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 6.52% + (7.95% – 6.52%) × (4 – 1) ÷ (5 – 1)
= 7.59%