WALMART INC. (WMT): what the price requires
At today's price, WALMART INC. (WMT) is priced for +21.7% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/WMT
Headline
| Field | Value |
|---|---|
| Ticker | WMT |
| Company | WALMART INC. |
| Current price | $114.64/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.0% |
| Operating margin today | 4.1% |
| Margin compression implied | -0.1pp |
| Implied growth | 21.7% |
| Multiple paid | 34x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~9.1pp.
Reconcile: at the x-ray's 9.3% required return this reads ~7 years; the models below use their own rates.
How unusual the bet is: high
| Reference | Value |
|---|---|
| vs own history | +2.76σ |
| cohort percentile (of 69 peers) | 83 |
| sustained it ~5 years at this level | 35% |
| implied end-window share | 5% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.14x | 4 | expensive |
| Earnings | 4.38x | 4 | expensive |
| Relative | 1.53x | 5 | expensive |
| Growth | 1.28x | 3 | expensive |
Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $30.38 | 3.77x | yes | FCF base $13.3B, growth 6% (input: historical growth), terminal g 4.0%, WACC 8.7%, 6yr projection |
| DCF Exit Multiple | Growth | $95.47 | 1.20x | yes | Exit EV/EBITDA: 30.1x / 32.1x / 34.1x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $74.76 | 1.53x | yes | P/E 27.5x (blended: static sector reference 22x + trailing (TTM) 40x), scenarios: 23.0x / 27.5x / 32.0x (bear / base = reference held flat / bull), EV/EBITDA 19.44x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $30.73 | 3.73x | yes | BV/sh $11.79, ROE (TTM) 24.1%, ke 9.3% |
| Two-Stage Excess Return | Asset | $49.68 | 2.31x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $89.87 | 1.28x | yes | Rev $725.3B, growth 6% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.3x / 1.5x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $65.23 | 1.76x | yes | EPS $2.84, growth 23% (input: historical EPS growth), PEG=1.76 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $22.79 | 5.03x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $26.63B × (1−23%) / WACC 8.7% → EPV (no growth) |
| Residual Income | Asset | $45.10 | 2.54x | yes | BV $11.79 + 5yr PV of (ROE (TTM) 24.1% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $27.45 | 4.18x | yes | √(22.5 × EPS $2.84 × BVPS $11.79) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $46.22 | 2.48x | yes | EBITDA $30.18B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $10.35 | 11.08x | yes | FCF $12552.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $91.64 | 1.25x | yes | EPS $2.84 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $5.30 | 21.63x | yes | BV $11.79 × (ROIC 3.9% / WACC 8.7%) (excluded from median) |
| P/Sales Sector | Relative | $181.35 | 0.63x | yes | Revenue $725.30B × sector P/S 2.0x |
| PEG Fair Value | Relative | $97.85 | 1.17x | yes | EPS $2.84 × (PEG 1.5 × growth 23.0% (input: historical EPS growth)) → PE 34.5x |
| Earnings Yield | Earnings | $30.70 | 3.73x | yes | EPS $2.84 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $47.4b |
| Net debt / NOPAT (after-tax) | 2.16x |
| Net debt / operating income (pre-tax) | 1.66x |
| Interest coverage | 12.4x |
| Share count CAGR (buyback) | -0.9% |
| Burning cash | no |
Bullet Takeaways
- Walmart is becoming a high-margin platform: membership and advertising now make up roughly a third of operating income, with Walmart Connect advertising up 37 percent and marketplace GMV up a record 50 percent, on top of 7.3 percent revenue growth and 26 percent e-commerce growth in Q1 fiscal 2027.
- The gross-profit rate has been expanding as the U.S. business manages prices to its competitive historic price gaps (FY2025 10-K, accession 0000104169-25-000021), and ROE runs near 24 percent, but the core retail margin remains a thin 4 percent.
- The valuation is the risk, not the business: no standard frame reaches the price, the inversion implies roughly 23 percent annual operating growth against management's 6-to-8 percent guidance, and tariff exposure (25 to 30 percent of general merchandise sourced from China) plus a mid-40s P/E leave no cushion for a multiple normalization.
Bull Case
The counterintuitive truth about Walmart is that the company the market is now paying for is not really a retailer. Roughly a third of Walmart's operating income now comes from membership and advertising, two businesses with margins far above the low-single-digit margins of selling groceries and general merchandise. The Walmart Connect advertising unit grew 37 percent year over year in the most recent quarter, and the third-party marketplace gross merchandise value surged a record 50 percent. These high-margin services are growing inside a retail chassis with 255 million weekly customers, and the company recognizes that financial, advertising, and other-services revenue as a component of net sales (FY2025 10-K, accession 0000104169-25-000021). A 24 percent return on equity on an 11.79-dollar book value tells you the blended business already earns far above its cost of capital, and the mix is shifting toward the parts that earn the most.
The core retail engine is not standing still either; it is taking share and improving its own economics. Q1 fiscal 2027 revenue rose 7.3 percent to 177.8 billion dollars, U.S. comparable sales grew 4.1 percent, and global e-commerce jumped 26 percent, the rare combination of a giant still compounding mid-to-high-single-digit top line. The gross-profit rate has been expanding, driven by the U.S. segment managing prices aligned to its competitive historic price gaps (FY2025 10-K, accession 0000104169-25-000021), which is Walmart-speak for getting more profitable while staying cheap. Scale automation in fulfillment and supply chain is lowering the cost to serve each incremental online order.
The forward guidance reflects a durable compounder. Walmart guided full-year constant-currency sales growth of 3.5 to 4.5 percent and operating-income growth of 6 to 8 percent, faster profit than revenue, which is the signature of the high-margin services flywheel pulling the mix up. The inversion shows the price embeds roughly 23 percent annual operating growth, demanding, but Walmart has the rare set of assets, scale, data, an advertising network, and a membership base, to deliver operating growth well ahead of revenue. This is the bull case: the world's largest retailer is quietly becoming a high-margin platform business, and the market is rerating it accordingly.
Bear Case
Read Walmart through the cycle and the valuation, and the picture is far less comfortable. The first issue is that the recent results sit near a cyclical and inflationary peak. Like-for-like inflation has run just above 1 percent, which still flatters comparable sales, and the gross-margin expansion that excites the bulls came partly from a benign cost environment. That environment is turning: the company already absorbed roughly 175 million dollars of higher-than-expected fuel costs in the quarter, a 250-basis-point drag on operating-income growth, and a 100-basis-point comp headwind from maximum-fair-pricing drug legislation. These are reminders that even Walmart's margins are squeezed when costs and policy move against it, and on a 4 percent operating margin there is little room to absorb shocks.
The larger structural threat is tariffs. Walmart sources an estimated 25 to 30 percent of its high-margin general merchandise directly from Chinese manufacturers, so an escalation in US-China trade tariffs hits precisely the categories that carry the best margins. Walmart's entire identity is built on the lowest price; passing tariff costs to customers risks the price-gap advantage that drives traffic, while absorbing them compresses the thin margin. Either way, a sustained tariff regime tests the famously low-price model. Competition compounds the pressure: Amazon's third-party marketplace and advertising ecosystem are far more established, and the marketplace seller-acquisition push Walmart is funding is capital-intensive and competitively contested.
The valuation leaves no margin for any of this. The engine's read is unambiguous: no valuation family reaches the price. Walmart is rich on assets, on earnings power, on peer multiples, and even on forward growth, meaning the price is a bet beyond what any standard frame supports. A P/E in the mid-40s for a company growing earnings in the high single digits is a multiple normally reserved for software, and the inversion implies roughly 23 percent annual operating growth, far above the 6-to-8 percent management itself guides. The gap between the implied growth and the guided growth is the bear case in one number. When a steady, low-margin retailer is priced for technology-like compounding, the risk is not that the business stumbles but that the multiple normalizes, and a return from a mid-40s P/E toward a retailer-appropriate multiple would erase years of returns even if Walmart executes perfectly.
Valuation
Walmart is priced like a platform and earns like a retailer, and the X-ray captures the tension starkly: no valuation family reaches the price. The relative-valuation frame at a blended P/E near 28 times lands around 76 dollars, the exit-multiple DCF near 97 dollars, and the asset and earnings-power frames far lower, with the zero-growth earnings-power value near 23 dollars and the Graham number near 27 dollars on a book value of just 11.79 dollars per share. Even the most generous growth-DCF reads land below the 117-dollar price. The engine's plain conclusion is that the price is a bet beyond what any standard method supports.
Inverting the price quantifies that bet. At the current level the market is paying about 35 times company-wide operating income, which implies operating growth of roughly 23 percent a year for five years. That is the heart of the problem, because Walmart's own full-year guidance is for operating-income growth of 6 to 8 percent. The implied growth is roughly three times the guided growth, and each one-percentage-point change in the cost of capital moves the implied figure by about 9 points, so even adjusting for solve sensitivity the gap is wide. The reliability of the solve is reasonable, which makes the conclusion harder to dismiss.
The honest synthesis is that the bull thesis, a high-margin advertising-and-membership flywheel rerating a retailer, is real but already more than priced in. The services mix shift is genuine and the operating leverage is genuine, but at a mid-40s P/E the market is extrapolating that shift at a pace the company's own guidance does not support. There is no asset or earnings-power floor anywhere near the price, so the downside in a multiple normalization is severe. This is a quality business at a price that requires near-flawless, technology-like execution for years; the appropriate posture is respect for the franchise paired with clear-eyed acknowledgment that the valuation, not the business, is the risk.
Catalysts
The dominant catalyst is the high-margin services mix. Walmart Connect advertising grew 37 percent and marketplace GMV grew 50 percent in the most recent quarter, and the pace of those two lines, plus membership-fee income, is the clearest read on whether operating income keeps outgrowing revenue as the bull thesis requires. Management guided full-year operating-income growth of 6 to 8 percent against constant-currency sales growth of 3.5 to 4.5 percent, so each quarter tests whether the services flywheel sustains the margin expansion that justifies the multiple.
The macro catalysts are tariffs and inflation. Because Walmart sources an estimated 25 to 30 percent of high-margin general merchandise from China, any escalation or de-escalation in US-China trade tariffs directly affects its margin and its price-gap advantage, making trade-policy developments a first-order driver. Fuel costs, which weighed about 175 million dollars and 250 basis points on operating-income growth in the quarter, and the maximum-fair-pricing drug legislation that cost 100 basis points of U.S. comps, are cost and policy items to watch. Given a mid-40s P/E, the market's willingness to sustain the multiple is itself a catalyst: any sign that growth is decelerating toward the guided range, rather than the implied 23 percent, would pressure the valuation more than the business.
Sources: Walmart Q1 2027 earnings, cnbc.com; Walmart Q1 2027 earnings transcript, fool.com; Walmart revenue hits 177.75B in Q1 FY2027, tikr.com; Walmart stock analysis, advertising, ecommerce and valuation, top1markets.com.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- TGT (TARGET CORPORATION)
- (no filing in the citation store)
- COST (COSTCO WHOLESALE CORP /NEW)
- (no filing in the citation store)
- DG (DOLLAR GENERAL CORP)
- (no filing in the citation store)
- DLTR (DOLLAR TREE, INC.)
- (no filing in the citation store)
- BJ (BJ’S WHOLESALE CLUB HOLDINGS, INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.