Does valuation look attractive?
Walmart (WMT) stock trades at 19.9x the fiscal 2019 estimated EPS of $4.85, which looks expensive based on the projected growth rate of 9.7% in that period and a dividend yield of 2.2%. Moreover, WMT stock is trading ~21% higher than its four-year average multiple of 16.8x.
Walmart is likely to benefit from its investments in the business. The company’s expansion of online grocery pickup services and doorstep delivery, the addition of pickup towers, and value pricing are likely to support its top line. Meanwhile, the company’s bottom line is expected to benefit from the lower effective tax rate and improved comps.
However, the company’s investments in growth measures are likely to pressure margins, and in turn, its EPS growth rate. Meanwhile, analysts expect the EPS growth rate for Walmart and its peers including Target (TGT) and Costco (COST) to slow down in 2019, reflecting tough YoY (year-over-year) comps.
Analysts maintain a “hold”
Of the 32 analysts covering Walmart stock, 19 analysts maintain a “hold” rating on the stock, while 13 analysts have a “buy” rating. Analysts have a consensus target price of $104 on WMT stock, which indicates an upside of 7.6% based on its closing price of $96.62 on September 5.
Analysts also maintain a “hold” rating on Target stock. Meanwhile, they have a “buy” rating on Costco.