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Drug Stores: Walmart

Drug Stores: Walmart. Eric Biro. Date of Value/Mid-Year Adjustments. Data used in valuation from F/S released 1/31/2013 Multiplied enterprise value by to bring value to today Expecting new financials sometime this week Adjusted timing of discounting to midyear

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Drug Stores: Walmart

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  1. Drug Stores: Walmart Eric Biro

  2. Date of Value/Mid-Year Adjustments • Data used in valuation from F/S released 1/31/2013 • Multiplied enterprise value by to bring value to today • Expecting new financials sometime this week • Adjusted timing of discounting to midyear • Multiplied enterprise value at 3/31/2014 by to more realistically show cash flows • Adjustments raised valuation by $54 billion

  3. Market Value of Debt Estimate • By definition:

  4. Value of Equity Share Estimate - Debt

  5. Sensitivity Analysis: WACC/Terminal Growth • Valuation shows Walmart as a strong buy compared to market’s value in all but the worst of situations

  6. Analyst Forecasts • Earnings • $5.76 - Consensus (2016) • $5.31 - NASDAQ (2016) • $5.81/$6.45 - 4-traders (2016/2017) • $7.00 - Value Line (2017) • Dividends • $1.98, $2.19 - 4-traders (2015/2016) • $2.50 - Value Line (2017) • Target prices • $105 - Value Line (2017) • $82 - Consensus (2015) • Sales Growth • 4.00% - Consensus (2014) • 4.50% - Fin. Times (2014-5) • 2.92%/4.03%/4.41% - 4-traders (2014-6)

  7. Value of Equity Share Estimates - Analyst • Dividend discount model • Uses projected dividends to compute a target price per share • Target prices • $105 - Value Line (2017) • $82 - Consensus (2015)

  8. Value of Equity Share Estimates - Analyst • Residual Income • Bases target price off residual earnings () • Target prices • $105 - Value Line (2017) • $82 - Consensus (2015)

  9. Takeaways • Lots of value is based on continuing estimates, which can swing valuation wildly depending on assumptions/model • 39% / 57% / 81% • Walmart appears undervalued by the market according to this valuation • Analysts have been downgrading the stock – how accurate is this? • Had issues calculating the long-term growth in residual income and earnings/sales

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