Inside Walmart’s Valuation and Growth Outlook
WMT’s valuation Summary
As of August 10, 2107, Wal-Mart Stores (WMT) stock was trading at a 12-month forward PE (price-to-earnings) of 18.2x. Notably, Walmart’s current valuation multiple is a bit higher than the S&P 500 Index’s (SPX) current forward PE of 17.8x. However, it’s lower than the Consumer Staples Select Sector SPDR ETF’s (XLP) forward PE ratio of 20.8x.
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Walmart stock is also trading at a higher valuation multiple than our select peer group average of 16.3x. The company’s high valuation seems justified, given its healthy performance amid challenges.
On August 10, Kroger (KR), Target (TGT), Dollar Tree (DLTR), and Dollar General (DG) were trading at forward PE ratios of 11.7x, 12.6x, 15.9x, and 16.3x, respectively. Costco Wholesale (COST) stock was trading at a forward PE multiple of 25.0x.
Remember, the 12-month forward PE tends to vary among companies based on several factors, including leverage, growth expectations, and profitability.
Walmart’s management expects its fiscal 2018 sales to improve in the range of 2.0%–3.0%. Strong digital sales and growth across its US stores are likely to drive its top-line growth, but increased competition and adverse currency fluctuations will likely remain a drag. Analysts expect Walmart’s sales to improve 2.0% in fiscal 2018 to $495.4 billion.
Analysts expect Walmart’s fiscal 2018 bottom line to rise 1%, despite its higher sales growth rate, as the company’s continued investments in prices are likely to offset its EPS (earnings per share) growth rate.
For more updates on Walmart stock, visit Market Realist’s Mass Merchandisers page.