Walmart Inc.WMTNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $177.76 per share(market-calibrated)

+39.0%

Upside to Fair Value

Current

$127.91

Pure Model

$181.54

Fair Value

$177.76

Bull Case

$218.84

Bear Case

$148.28

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

1.31%

Calibrated Growth

2.20%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $181.54.

What's Driving This Ratingfor WMT

✓

CapEx already efficient

CapEx at 2.09% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 5.98% — below the sector mature average of 16.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $124.6B (12.72% margin).

→

Moderate revenue growth

Analyst consensus projects -0.08% revenue growth, fading to 2.50% by Year 10. Revenue reaches $979.7B (vs $713.2B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $153.56/share (22.0x terminal FCF) while exit multiple gives $209.52/share (32.1x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.50% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 1.31% perpetual growth — 119bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 62.30% indicates efficient cash generation. FCF reaches $88.0B by Year 10 (8.98% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.66

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.46%

Cost of Debt

Pre-tax Cost of Debt3.68%

Tax Rate24.43%

After-tax Cost of Debt2.78%

Equity Weight (E/V)93.83%

Debt Weight (D/V)6.17%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (93.83% × 7.46%) + (6.17% × 2.78%)

= 7.17%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$712.6B	$783.9B	$850.1B	$904.7B	$979.7B
EBIT	$42.6B	$46.9B	$50.9B	$86.7B	$124.6B
Tax	$10.4B	$11.5B	$12.4B	$21.2B	$30.4B
NOPAT	$32.2B	$35.4B	$38.4B	$65.6B	$94.2B
+ Depreciation	$12.1B	$13.3B	$14.5B	$15.4B	$16.7B
- Capex	$14.9B	$16.3B	$17.7B	$18.9B	$20.4B
- Δ NWC	-$58M	$3.5B	$2.8B	$2.7B	$2.4B
Free Cash Flow	$29.5B	$28.9B	$32.3B	$59.4B	$88.0B
Discount Factor	0.933	0.812	0.707	0.616	0.500
Present Value	$27.6B	$23.5B	$22.9B	$36.6B	$44.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$88.0B

Terminal Growth Rate2.50%

WACC7.17%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$1.9T

PV of Terminal Value$966.9B

Exit Multiple Method

Year 10 EBITDA$141.2B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$2.8T

PV of Terminal Value$1.4T

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$315.3B

PV of Terminal Value$966.9B

Enterprise Value$1.3T

(-) Net Debt$56.4B

Equity Value$1.2T

Shares Outstanding8.0B

Price per Share$153.56

Exit Multiple Method

PV of Projected FCFs$315.3B

PV of Terminal Value$1.4T

Enterprise Value$1.7T

(-) Net Debt$56.4B

Equity Value$1.7T

Shares Outstanding8.0B

Price per Share$209.52

Pure Model Fair Value

$181.54

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
5.17%	$236.40	$251.47	$272.18	$302.45	$307.04
6.17%	$197.91	$206.17	$216.69	$230.53	$249.55
7.17%	$170.37	$175.41	$181.54	$189.14	$198.80
8.17%	$149.20	$152.51	$156.40	$161.04	$166.67
9.17%	$132.18	$134.45	$137.07	$140.12	$143.69

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$148.28

15.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.82

Base Case

$181.54

41.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.66

Bull Case

$218.84

71.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.56

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Defensive Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-0.08%

Year 3 Revenue Growth4.71%

Year 5 Revenue Growth3.45%

Year 7 Revenue Growth3.07%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin5.98%

Terminal EBIT Margin16.00%

Tax Rate24.43%

Historical Capex / Rev2.09%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Defensive sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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