How Walmart’s Valuation Looks Now
As of March 15, Wal-Mart Stores (WMT) was trading at a 12-month forward PE (price-to-earnings) ratio of 16.3x. Currently, the company is trading at a lower valuation multiple than the S&P 500 Consumer Staples Index, which has a forward PE ratio of 21.4x and that of S&P 500 Index (SPX), which has a forward PE ratio of 18.8x.
By comparison, Walmart’s valuation multiple is also lower than the peer group average of 18.1x. As of March 15, Target (TGT), Costco Wholesale (COST), Kroger (KR), Dollar Tree (DLTR), Dollar General (DG), and Whole Foods Market (WFM) were trading at forward PEs of 13.6x, 27.7x, 13.2x, 16.7x, 15.8x, and 21.8x, respectively.
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We should point out here that the 12-month forward PE differs among companies based on several factors, including growth expectations, leverage, profitability, business model, and risk-return profiles.
Currently, analysts expect Walmart to generate revenue of $495 billion in fiscal 2018, which would be more or less flat YoY (year-over-year). Walmart’s management stated that its reported sales numbers are expected to grow 2%–3%. However, on a constant currency basis, the top line is expected to increase by 3%–4%. Currency headwinds are expected to impact the top line by $3 billion.
Analysts expect the company’s fiscal 2018 adjusted EPS (earnings per share) to remain flat at $4.32. Meanwhile, management expects its EPS to be in the range of $4.20–$4.40. This outlook assumes a negative impact $0.05 per share due to adverse currency fluctuations.
An uphill task
Walmart is leaving no stone unturned in its drive to boost top-line growth. The company’s strategic investments to overhaul its operations by integrating its product offerings through multiple channels have been helping it drive store sales, as we can see in the rise in store traffic. However, adverse currency movements, commodity deflation, and increased competition will likely continue to pressure Walmart’s financial performance going forward.
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