Where Does Walmart’s Valuation Stand after the Fiscal 3Q17 Results?

12-month forward PE

On November 18, Wal-Mart Stores (WMT) was trading at a 12-month forward PE (price-to-earnings) ratio of 15.8x. The company’s valuation multiple fell 2.9% on November 17 in reaction to its fiscal 3Q17 results. Walmart exceeded the consensus analysts’ earnings estimate for fiscal 3Q17 but missed the revenue estimate.

Where Does Walmart’s Valuation Stand after the Fiscal 3Q17 Results?

Relative valuation

With the exception of Target (TGT) and Kroger (KR), Walmart’s valuation multiple is currently lower than other major peers. On November 18, Target, Costco Wholesale (COST), Kroger, Dollar Tree (DLTR), Dollar General (DG), and Whole Foods Market (WFM) were trading at forward PE multiples of 14.0x, 24.8x, 14.9x, 18.7x, 16.1x, and 21.4x, respectively.

Remember, the 12-month forward PE multiple differs among companies due to several factors, including risk-return profiles and growth expectations.

Growth expectations

Analysts expect Walmart’s revenue to rise 0.8% to $485.8 billion in fiscal 2017. Analysts anticipate that its fiscal 2017 adjusted EPS will fall 5.7% to $4.33 on a year-over-year basis.

By comparison, analysts expect the adjusted EPS of Target, Costco, Kroger, Dollar Tree, Dollar General, and Whole Foods Market to rise 10.2%, 11.3%, 3.4%, 63.8%, 13.4%, and -8.8%, respectively, in the current fiscal year.

Walmart is now facing headwinds in the form of food deflation, currency headwinds, and macro challenges in markets like the United Kingdom. The company’s bottom line is also under pressure due to its significant investments in boosting its top line, including strengthening its e-commerce capabilities.

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