Retail giant Walmart Inc. (WMT) is one of the most valuable companies globally and is ranked #1 on the Fortune 500 list. It is one of the largest companies in the world in terms of revenue and has a $378.07 billion market capitalization. The company also launched a membership service in September 2020 to provide unlimited free deliveries and discounts on fuel purchases from partnered gas stations. Walmart+ reached a subscriber base of 32 million on September 14, 2021, within one year of its launch.

However, WMT has been losing momentum for quite some time, as investors have been betting on relatively risky stocks amid the fast-paced macroeconomic recovery and bullish market trends. Shares of WMT declined 5.3% year-to-date and 8.3% over the past month to close yesterday’s trading session at $137.15.

Here’s what could shape WMT’s performance in the near term:

Stable Cash Flows

WMT is a renowned cash cow in the retail industry. Its trailing-12-month revenues stand at $571.96 billion. The company has a total debt of $58.48 billion. However, WMT’s trailing-12-month cash balance is $16.11 billion, translating to net debt of $42.37 billion. The company’s trailing-12-month net operating cash flow amounted to $29.49 billion, while its levered free cash flow came in at $11.49 billion.

WMT has a covered ratio of 14.13 and a debt/free cash flow ratio of 3.29. Its long-term debt is 36.5% of total capital.

Impressive Growth Story

WMT’s revenues increased at a 3.8% CAGR over the past three years. Its operating income and net income rose at CAGRs of 10.3% and 15.9%, respectively, over this period. WMT’s EPS grew at a rate of 17.5% per annum over the past three years. Both tangible book value and total assets improved at a 9.2% CAGR over the past three years.

Low Valuation

In terms of forward non-GAAP PEG, WMT is currently trading at 2.5x, 5.2% lower than the industry average of 2.64x. In addition, its forward Price/Sales and Price/Cash Flow multiples of 0.67 and 13.72 are lower than the industry averages of 1.45 and 13.81, respectively.

Also, WMT’s forward EV/EBITDA multiple of 11.79 is 4.2% lower than the industry average of 12.3.

Favorable POWR Ratings

WMT has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

The stock has a grade of A for Stability and a B for Quality. Its 0.52 beta is in sync with the Stability grade. Furthermore, WMT’s trailing-12-month return on total capital (ROTC) of 12.07% is 76.8% higher than the industry average of 6.83%, justifying the Quality grade.

WMT is ranked #4 out of 40 stocks in the A-rated Grocery/Big Box Retailers industry.

In addition to the grades I’ve highlighted, you can view WMT ratings for Momentum, Sentiment, Growth, and Value.

Bottom Line

The rising concerns surrounding the resurgence of COVID-19 cases have caused the markets to remain under pressure lately. Nonetheless, WMT’s strong cash position should allow the company to remain relatively unscathed by the current healthcare crisis, thus making it an ideal investment bet now.

How Does Walmart Inc. (WMT) Stack Up Against its Peers?

WMT has an overall POWR Rating of A, which equates to Strong Buy. Check out these other stocks within the Grocery/Big Box Retailers industry with A (Strong Buy) ratings: Natural Grocers by Vitamin Cottage, Inc. (NGVC), Ingles Markets, Incorporated (IMKTA), and Albertsons Companies, Inc. (ACI).

WMT shares were trading at $138.50 per share on Thursday afternoon, up $1.35 (+0.98%). Year-to-date, WMT has declined -2.78%, versus a 25.95% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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