WALMART INC. (WMT): what the price assumes

In the published model solve dated 2026-Q2, anchored at $103.08, WALMART INC. (WMT) is priced for +16.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-08-07.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/WMT

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.8% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits 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.

Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.6%); the inversion above states its own rate.

Per-Model Detail (n=17)

Solvency

Bullet Takeaways

• The growth in this business no longer comes from the shelves: in the quarter ended April 30, 2026, eCommerce net sales rose $8.5 billion or 26% and membership and other income rose 27.0% on 17.4% growth in membership fee revenue, while the gross profit rate improved on growth in higher margin businesses, including advertising.

• The specific risk is that operating profit is not keeping up with the store: operating income as a percentage of net sales fell 13 basis points across fiscal 2026 and another 8 basis points in the April quarter, held down by roughly 0.9 billion dollars of higher self-insured general liability claims, a 0.7 billion dollar charge tied to PhonePe share-based compensation, and depreciation on a rising capital budget.

• Management's own fiscal 2027 plan calls for adjusted operating income growth of 6.0% to 8.0% in constant currency, reaffirmed on May 21, 2026, with capital expenditures of approximately 3.5% of net sales; the next check on it is the July-quarter report.

Bull Case

Take the objection first, because it is the honest one. Walmart's operating profit grew about 1.6% last fiscal year, its operating income as a share of net sales went down rather than up, and the quote attached to that record is roughly 32 times operating income. On the face of it that is a mature retailer priced like something else.

The something else is visible inside the revenue lines. In the April 2026 quarter, membership and other income rose 27.0%, driven by 17.4% growth in membership fee revenue with strength across membership programs globally, and the company attributed its improved gross profit rate to merchandise mix shifts and growth in higher margin businesses, including advertising. Those are subscription and media economics, and they do not behave like grocery. A dollar of membership fee arrives with almost no cost of goods behind it. A dollar of advertising sold against traffic the company already owns arrives with less than that.

The second mechanic is what happened to the stores. Walmart U.S. comparable sales rose 4.3% in the April quarter, and the filing states that Walmart U.S. eCommerce sales positively contributed approximately 5.2% to comparable sales, primarily driven by store-fulfilled delivery. Read those two figures together and the arithmetic is blunt: digital orders more than accounted for the entire comparable-sales gain, and the shelves themselves went slightly backwards. The same pattern held across fiscal 2026, when eCommerce contributed about 4.3 points of a 4.3% comparable-sales increase. The buildings are becoming the delivery network, and the fixed cost of the buildings was already being paid.

Scale is the part that cannot be copied quickly. Walmart U.S. produced 25.16 billion dollars of operating income on 482.98 billion dollars of net sales in fiscal 2026, up from 23.88 billion the year before. A rival trying to reach that base has to build the grocery volume first, because grocery is what generates the weekly trip that the advertising and the membership monetize. COST, the nearest thing to a peer on discipline, runs a 3.8% operating margin on 293.59 billion dollars of revenue, and TGT a 4.5% margin on 106.38 billion; neither has the density of visits that turns a store into a fulfillment node without new capital.

And the capital is being spent deliberately rather than defensively. Capital expenditures reached 26.64 billion dollars in fiscal 2026 against 23.78 billion the year before, allocated, per the filing, to higher-return areas focused on automation such as eCommerce, supply chain and store and club investments. Depreciation on that spend is one reason reported profit looks flat. It is also the reason the delivery economics keep improving.

Bear Case

Line up the valuation methods and something unusual shows up: they agree. The asset-value approaches land about three times under today's quote. The earnings-power approaches, which capitalize demonstrated profit with no growth credited, land more than four times under it. Even the peer-multiple approaches, which are supposed to be sympathetic because they price a company against whatever its sector currently fetches, land roughly 1.5 times under. Nothing reaches the quote. When the conservative frames and the generous frames both say the same thing, the disagreement is no longer about method. It is about whether the next several years look like the last several.

They have not so far. Consolidated operating income ran 27.01 billion dollars in fiscal 2024, 29.35 billion in fiscal 2025 and 29.83 billion in fiscal 2026. The most recent quarter added 5.0%, from 7.14 billion dollars to 7.49 billion. Today's quote needs operating profit to compound at roughly 19.5% a year for 5 years. Management's own plan for the current fiscal year, reaffirmed on May 21, 2026, calls for adjusted operating income growth in constant currency of 6.0% to 8.0%. The gap between what is being paid for and what is being guided to is not a rounding difference. It is the thesis.

Profitability is also moving the wrong way while the mix is supposedly improving. Operating income as a percentage of net sales fell 13 basis points in fiscal 2026 and a further 8 basis points in the April quarter. The named causes are ordinary and recurring rather than one-time: approximately 0.9 billion dollars of higher self-insured general liability claims expense, influenced by rising costs to resolve claims across retail and related industries; a 0.7 billion dollar charge on modified PhonePe share-based compensation; 0.2 billion dollars of business reorganization charges in the April quarter; and higher associate healthcare costs from increased enrollment and medical cost inflation in the U.S.. Advertising and membership are indeed growing faster than the base. They are not yet growing fast enough to lift the consolidated result.

Then there is what the growth costs. Capital expenditures rose to 26.64 billion dollars in fiscal 2026, and the fiscal 2027 plan holds them at approximately 3.5% of net sales. In the April quarter that spending ran ahead of what the operations produced, leaving the quarter's free cash flow at negative 1.9 billion dollars, a swing of 2.4 billion from the prior-year quarter, which the company attributes to an increase of $1.7 billion in capital expenditures to support our omnichannel growth strategy. A retailer that must keep rebuilding its own logistics to defend a nickel of profit on the sales dollar has less slack than the balance sheet suggests.

The competitive threat is named in the company's own risk section, and it is not another retailer's store base. The filing warns that the entry of new, well-funded competitors, or more rapid development of AI capabilities and agentic tools by these competitors to enhance productivity and the shopping experience, may increase competitive pressures, and adds that in eCommerce newer or smaller businesses may be better able to innovate. If ordering moves to an agent that shops on price and delivery window, the store-network advantage still holds but the advertising business, which is the part carrying the multiple, is exactly the part that a machine buyer stops looking at.

Finally, the obligations. Borrowings plus finance leases stood at 58.13 billion dollars against 10.73 billion of cash at April 30, 2026, and including operating lease obligations the total reaches 74.18 billion. Nothing about that is fragile for a company earning what Walmart earns. It does mean the equity carries the full volatility of a thin operating result, and a thin result priced at a wide multiple is the definition of a name with little tolerance for a bad year.

Valuation

What is being paid for is a change in growth rate, not a change in size. Today's quote carries about 32 times the operating income of the trailing year ended April 30, 2026, and for that arithmetic to resolve, operating profit has to compound at roughly 19.5% a year over the next 5 years. Set against the company's own record, where operating profit has been advancing in the low single digits, that assumption is a long way from the trend line. Among comparable fast growers, only about 38% sustained a pace like that even half a decade. Against its own sector cohort, the multiple sits at the very top of the distribution rather than in its upper reaches.

The trailing year behind those figures is worth naming precisely, because it straddles two fiscal years. It runs from the May 2025 quarter through the April 2026 quarter and produced 30.18 billion dollars of operating income on 725.3 billion dollars of revenue, a 4.2% operating margin. That reconciles to the filed statements exactly. Fiscal 2026 as reported, which ended January 31, 2026, produced 29.83 billion dollars on 713.16 billion.

Every family of method used to triangulate this company lands beneath the quote, and they are not close together in how far beneath. The earnings-power family, which capitalizes demonstrated profit and credits no growth at all, sits more than four times below. The asset-value family, roughly three times below. The peer-multiple family, about 1.5 times below, which is the narrowest gap and still a substantial one. There is no family here whose central estimate the price reaches, which makes this a different situation from the usual premium-growth name where at least the forward methods can be made to work. The price is a statement about a business that does not yet exist in the reported numbers.

Where solvency bears on that, it bears helpfully. Borrowings and finance lease obligations of 58.13 billion dollars against 10.73 billion of cash leave net obligations of about 1.6 times operating profit on that build; counting operating leases as well, total obligations reach 74.18 billion dollars, a materially larger figure that reflects the store estate rather than any financing stress. Operating profit covers interest on borrowings roughly 12.7 times over, and the share count has drifted down about 0.9% a year over the four years to April 2026, so the per-share figures are getting a small tailwind rather than fighting dilution. The downside here is not solvency. It is multiple.

The peer cohort makes the same point from a different direction. COST earns a 3.8% operating margin on 293.59 billion dollars of revenue and grew 9.2%; TGT earns 4.5% on 106.38 billion and grew 0.5%. Walmart sits between them on profitability and closer to COST on growth. It is the multiple, not the operating profile, that separates this company from its cohort.

Catalysts

The last hard print landed on May 21, 2026. Total revenues for the quarter ended April 30, 2026 were 177.75 billion dollars, up 7.3%, with operating income of 7.49 billion dollars, up 5.0%, and eCommerce net sales ahead $8.5 billion or 26%. The declared quarterly dividend rose to 99 cents a share from 94 cents.

Guidance was reaffirmed rather than raised, which is itself information. For fiscal 2027 the company held its February plan: net sales growth in constant currency of 3.5% to 4.5%, adjusted operating income growth of 6.0% to 8.0% on the same constant-currency, company-defined basis, an effective tax rate around 23.5% to 24.5%, and capital expenditures of approximately 3.5% of net sales. For the July quarter it guided net sales up 4.0% to 5.0% and operating income up 7.0% to 10.0%, both in constant currency. Two things to watch when that quarter is reported: whether membership and advertising keep compounding at their current pace, and whether the general liability and healthcare cost lines that took basis points out of the fiscal 2026 result are still doing so.

One external variable sits outside all of it. The May guidance explicitly does not assume any impact from IEEPA tariff refunds. Import cost and any refund of duties already paid land directly on the cost of goods for a company that sources at this scale, so a resolution in either direction moves the reported result without anything changing in the stores.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• TGT (TARGET CORPORATION)
• FY2025 10-K: …and Analysis of Financial Condition for 2023, as compared to 2022, is included in Part II, Item 7, MD&A to our Annual Report on Form 10-K for the year ended February 3, 2024 . Net Sales Net Sales includes Merchandise Sales and revenues from other sources, most notably advertising revenue and credit card…
• FY2025 10-K: …of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible. TD Bank Group offers credit to qualified guests through Target-branded credit cards: the Target Credit Card and the Target MasterCard Credit…
• COST (COSTCO WHOLESALE CORP /NEW)
• FY2025 10-K: …of the economies in which we do business, including the effects of inflation or deflation, especially the United States. Net sales growth and gross margins are also impacted by competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers, including…
• FY2025 10-K: …as a percentage of 23 Table of Contents net sales (gross margin percentage) in the near term. Our e-commerce business, domestically and internationally, has a lower gross-margin percentage than our warehouse operations. Government actions in various countries relating to tariffs affect the costs of some of our…
• DG (DOLLAR GENERAL CORP)
• FY2025 10-K: …service offerings, product sourcing and supply chain capacity, in-stock consistency, customer service, ease of shopping experience (including but not limited to various modes of shopping, including online alternatives and delivery), promotional activity, employees, and market share. We compete with discount stores…
• FY2025 10-K: …operate stores in many of the areas where we operate, and many of them engage in extensive advertising and marketing efforts. Our direct competitors include Family Dollar, Dollar Tree, and various local, independent operators, as well as Walmart, Target, Kroger, Aldi, Costco, Sams Club, BJ's Wholesale Club,…
• DLTR (DOLLAR TREE, INC.)
• FY2025 10-K: …operations and financial condition of our continuing operations. Overview We are a leading operator of more than 8,800 retail discount stores, as of February 1, 2025, offering merchandise predominantly at the opening price point of $1.25, with additional offerings at higher price points. Our net sales are derived…
• FY2025 10-K: …our prices, but our ability to do so may be limited with the result that we could see lower sales or reduced profitability. We expect competition to increase in the future. There are no significant economic barriers for others to enter our retail sector. We compete with discount stores and many other retailers,…
• BJ (BJ’S WHOLESALE CLUB HOLDINGS, INC.)
• FY2025 10-K: …We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices and in a timely fashion. We source our merchandise from a wide variety of domestic and international vendors. Finding qualified vendors who meet our standards and acquiring merchandise in a timely and efficient…
• FY2025 10-K: …estimated impact of returns, was $ 5.4 million in each of fiscal years 2024 and 2023, respectively, and $ 6.1 million in fiscal year 2022. Actual sales returns were $ 221.7 million, $ 220.7 million, and $ 228.9 million in fiscal years 2024, 2023 and 2022, respectively. Customer Discounts Discounts given to customers…

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.