Walmart (WMT)
Retail / Consumo defensivo
The world's largest retailer, with a scale/cost moat and a high-margin flywheel (advertising, membership, marketplace) that expands the margin while revenue grows ~4-5%. At ~$106 (~37× P/E) it trades at a software-like multiple over a retailer: Overvalued, priced for the flywheel to keep compounding.
- Price
- $105.73
- Intrinsic value (5y, base)
- $94
- Total annual return (5y)
- -1.1%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- The world's largest retailer (net sales $706bn): Walmart U.S. (5.2% margin, ~84% of segment operating income), International (3.9%) and Sam's Club (2.6%). Scale/cost moat, defensive.
- The high-margin flywheel (advertising, membership, marketplace) expands the margin: net income grew ~18%/year over two years and operating income grows faster than revenue (~4-5%).
- At ~$106 (~37× P/E) it trades at a software-like multiple over a retailer → Overvalued: priced for perfection. Walton family ~44% (controlled); Furner CEO since Feb-2026.
Intrinsic value — two valuation methods
Total return at 5 years: -1.1%/year = -2.2% appreciation + 1.1% dividend. The target price ($94) is ex-dividend; the $6 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $77 · Multiples $81) is below the market price ($106).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $106 trades ~30.9% above its value discounted to today (~$81); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$51.
Thesis
The business
Walmart is a quality, low-fragility compounder: the largest scale/cost moat in retail, defensive (groceries), with a high-margin flywheel (advertising, membership, marketplace) that expands the margin and grows operating income faster than sales. The Walton family (~44%) gives stability and a long horizon. The counterweight: the core is thin-margin (~4%), capex is high (automation), and —above all— the valuation is rich.
The valuation
It is valued on P/E over attributable net income: the business has net debt, material stock-based compensation (~24% of cash flow) and a noncontrolling interest, all of which the P/E over attributable net income captures or expenses. The flywheel is modeled as margin expansion (earnings grow faster than revenue), not as a separate piece —advertising is not broken out in the filing, so no margin is invented for it.
The base scenario projects a value of ~$94 per share over five years, an annual return of ~-1% from the current ~$106. At today's price it trades at ~37× earnings —a software-like multiple for a retailer— and compresses toward ~26× over five years as earnings compound. The rich entry is the price of a quality compounder; the flywheel has to deliver to justify it.
The margin of safety
The verdict is Overvalued: No margin of safety: the price already discounts a demanding scenario.. At ~$106 the expected return (~-1%) falls short of the required average return (10%): Walmart compounds earnings ~7-8% a year, but the ~40× multiple already discounts that success, so the compression of the multiple toward a reasonable level (~22×) more than neutralizes the earnings growth. There is no margin of safety at this price — it is an excellent business priced for perfection.
What to watch
The high-margin flywheel is the entire thesis: if advertising, membership and the marketplace keep expanding the margin (earnings growing faster than revenue), the stock grows toward its multiple; if they decelerate, the ~40× P/E re-rates downward. Below that: tariff exposure (Walmart imports at large scale), Amazon's competition in advertising and e-commerce, the disruption of AI-powered shopping, and Furner's execution in his first year as CEO.
Educational / informational. Does not constitute investment advice.