Written by, Gavin Eger and River Vasek
This report applies an adaptation of Michael Gatto’s Credit Analysis Framework to evaluate Walmart Inc. (NYSE: WMT). The purpose is to examine Walmart’s financial strength, strategic positioning, and long-term value potential through a structured approach. The analysis will cover the company’s sources and uses of capital, qualitative fundamentals, financial performance, forecasted outlook, and valuation, and will conclude with an investment recommendation based on key findings.
Sources and Uses
Taking a look at Walmart’s most recent 10-K, we can see that Walmart’s primary source of capital is the consistent cash flow generated from operations, which totaled $35.7 billion in fiscal 2024, up from $28.8 billion in 2023. This strong operating performance, supported by disciplined working-capital management, provides the foundation for the company’s liquidity. Walmart also maintains $9.9 billion in cash and cash equivalents, along with access to $15.0 billion in undrawn committed credit lines, ensuring flexibility in funding future needs. Additional liquidity is derived from short-term borrowings, which averaged $4.30 billion at an average interest rate of 5.1%, and long-term debt totaling $39.6 billion, including $4.97 billion in new issuances during the year. The company’s strong credit ratings from S&P (AA), Moody’s (Aa2), and Fitch (AA) further support low-cost access to capital markets.
On the uses side, Walmart deployed capital primarily toward reinvestment, shareholder returns, and debt management. Capital expenditures were $20.61 billion, focused on technology, supply-chain improvements, and customer-facing initiatives. The company distributed $6.1 billion in dividends and repurchased 54.6 million shares for approximately $2.8 billion at an average price of $50.87. Additionally, Walmart repaid $4.2 billion in long-term debt and spent $3.5 billion acquiring additional ownership in its Flipkart subsidiary. As of January 31, 2024, Walmart also had $34.3 billion in purchase obligations, with $14.6 billion due within one year. Overall, Walmart’s substantial operating cash flow comfortably covered both its investing and financing needs, underscoring its ability to fund growth initiatives while maintaining a conservative liquidity profile and strong balance-sheet position.
Qualitative Analysis
Walmart is known for being the low-cost retail giant and their most recent 10-K filing shows a clear image of what the future holds for the company.
Industry Context; Walmart prides itself on the motto, “Every Day, Low Prices,”(Walmart Inc., 2025) and with the retail industry growing both in the physical and online market, the retailer has to find a way to solidify themselves at the top. Not only does the company have to deal with the inflation that has impacted our economy since COVID-19, they have to innovate and compete with other big-box retailers like Target and Costco, while still being competitive in the online space. Walmart is currently serving about 255 million customers a week in more than 10,500 stores and numerous eCommerce websites in 19 countries (Walmart Inc., 2024). This global scale shows the gap between Walmart and the other competitors, but on the other hand shows that the company must adapt to changing customer expectations, supply chain situations, and the rapid development of the online retail space.
Business Model: Walmart also prides itself on its accessibility across the country, which has helped the company generate revenue not only from Walmart and Walmart.com, but also from its membership programs, including Walmart+ and Sam’s Club (Form 10-K, Walmart Inc., 2025, U.S. Securities and Exchange Commission). Its omnichannel approach gives customers the opportunity to shop both in stores (e.g., Walmart and Sam’s Club) and online (Walmart.com and SamsClub.com), demonstrating how this model has become a major differentiator in the retail industry.
Competitive Advantage; Only a few retailers can rival what Walmart has done in regards to its combination of scale, brand trust, and efficient logistics. The large supplier network and advanced data systems Walmart has under them ensures that costs will stay as low as possible while turning inventory quickly. Another factor is its ability to adapt to technology. The investments made by Walmart in the digital environment, especially through its online marketplace and AI-powered supply chain, have strengthened the company to combat competing retailers.
Management Quality; The current President and CEO of Walmart, Doug McMillon guides the leadership team ultimately reflecting not only his experience, but his ability to adapt over his 30 years working at Walmart. McMillon brings a deep understanding of Walmart’s culture and applies that to boosting the company’s customer base. Under his leadership, the company has seen consistency even through tough times throughout his time at Walmart.
Walmart is also focusing on the innovation and long-term strategy of the company. Over the past 5 years, Walmart has made efforts with regards to making self check-out more widespread and coming up with ideas to decentivize theft within the self check-out area (Walmart Inc., 2020). Another way the company is focusing on innovation is through looking and evaluating the ethical practices, sustainability, and community engagement of the company. By focusing on the long-term as well as innovation, this company will not only remain competitive, but can potentially evolve rapidly in the retail landscape.
Financial Statement Analysis
On a full-year basis (FY2024 10-K), Walmart delivered scale growth and resilient profitability: revenue $648.1B, operating income $27.0B, net income $15.5B, operating cash flow $35.7B, and moderate leverage with long-term debt of $39.6B (total debt including short-term borrowings was $40.5B at year-end; $43.5B as of July 31, 2025). In Q2 FY2026 (quarter ended July 31, 2025), the trend remained intact: revenue rose 4.8% YoY to $177.4B (six-month 3.7% to $343.0B); operating income declined to $7.3B from $7.9B YoY while net income increased 56% YoY to $7.0B, largely due to sizable “other gains” driven primarily by fair-value changes in investments and similar episodic items. Liquidity stayed solid with cash of $9.4B and six-month operating cash flow of $18.4B (12% YoY) versus capex of $11.4B. Working capital remained disciplined (inventories $57.7B, 3.8% YoY), and the balance sheet conservative (long-term debt $35.6B; shareholders’ equity $96.6B). Overall, Q2 FY2026 results reaffirm Walmart’s low-risk profile, steady revenue growth, ample liquidity, and disciplined capital allocation, while noting that the recent earnings strength reflects temporary factors rather than a structural improvement in profitability.
Forecasting
Taking a look at macroeconomic and external factors, such as tariff and import-cost pressures, consumer spending and inflation, global trade and geopolitical disruption, and retail sector competitive and structural shifts, the next year presents both opportunities and constraints for Walmart’s financial outlook. The continuation of elevated U.S. tariffs has pushed the post-substitution U.S. average effective tariff rate to 17.0% in 2025, with the implied policy rate peaking at 28% earlier in the year. Walmart has acknowledged that these tariffs are raising its input costs, though it is attempting to shield consumers from price increases.
Inflation is expected to remain above the Federal Reserve’s 2% target into 2026: the Fed’s September 2025 Summary of Economic Projections shows PCE inflation 3.0% for 2025 and 2.6% for 2026. U.S. retail spending growth for 2025 is forecast at 2.7%–3.7%, broadly in line with the pre-pandemic 10-year average of 3.6%. For Walmart, this backdrop is consistent with company guidance calling for 3%–4% net-sales growth for FY2026, driven primarily by grocery and e-commerce.
Geopolitical tensions, particularly renewed U.S.–China trade frictions and the ongoing Russia–Ukraine conflict (as well as Red Sea rerouting), continue to create logistics volatility that can raise transportation costs and affect inventory timing. Walmart’s scale, diversified supplier base, and near-shoring/sourcing initiatives (e.g., more than $6 billion of 2025 investment in Mexico and an ongoing goal to source $10 billion annually from India by 2027) are expected to partially offset these effects.
On the competitive side, the broader U.S. retail environment remains pressured by digital-transformation costs and cautious consumers. To stay competitive, Walmart is sustaining elevated investment levels, including automation and AI-enabled supply chain and fulfillment. FY2025 capex was $23.783 billion, and FY2025 free cash flow was $12.660 billion; Walmart’s FY2025 operating margin was 4.31% (operating income $29.348 billion on total revenues $680.985 billion). These investments can weigh on near-term free cash flow but are intended to support long-term efficiency and earnings growth as macro headwinds ease.
Overall, Walmart’s macro-driven outlook suggests a period of steady but modest expansion—revenue growth of 3%–4% with operating discipline—while tariffs, above-target inflation, and geopolitical uncertainty limit upside potential. Walmart’s scale, diversification, and technology investments provide a defensive foundation in a volatile global environment
Corporate Valuation
To assess Walmart’s intrinsic and relative value, both discounted cash-flow (DCF) and market multiple methods are applied. Under the DCF framework, Walmart generated $15.12 billion in free cash flow in FY 2024 (operating cash flow $35.726 billion, capex $20.606 billion). Using modeling assumptions of 7.50 percent WACC, 3.00 percent annual FCF growth, and a 2.50 percent terminal rate, the valuation produces an enterprise value of $443.2 billion and, after subtracting net debt of $29.7 billion, an equity value of $413.5 billion, or $51.88 per share on 7.97 billion shares. The intrinsic result is well below current trading levels, implying that investors are discounting stronger growth, higher terminal margins, or a lower cost of capital than the model assumes.
On a market basis, Walmart’s share price of $102.46 (Oct 29 2025) gives a market capitalization of $816.6 billion and an enterprise value of about $872 billion (Yahoo Finance; GuruFocus range $866–$881 billion). The stock trades at 20.8× EV/EBITDA (GuruFocus 2025), 38.1× trailing P/E (YCharts 2025), and 1.20× price-to-sales (YCharts 2025) all modestly above its long-term averages. Peer comparisons show Costco (31.8× EV/EBITDA, 50× P/E; Finbox & Yahoo Finance 2025), Target (7.5× EV/EBITDA, 11–12× TTM P/E; StockAnalysis 2025), and Amazon consolidated (18–19× EV/EBITDA, 3.6× P/S; Finbox & YCharts 2025). Walmart’s valuation thus sits between discount retailers and high-growth peers, commanding a defensive premium for its scale, consistency, and omnichannel reach.
Overall, Walmart appears fully valued to slightly overvalued. The market price implies returns that a conservative DCF does not, yet prevailing multiples reflect justified confidence in Walmart’s durable cash flows and global retail leadership. In sensitivity tests (model-derived), reducing WACC by 50 basis points or raising FCF growth to 4 percent would lift intrinsic value to roughly $63–65 per share, illustrating how small macro-rate or growth changes could reconcile DCF and market pricing.
Investment Recommendation
In conclusion, Walmart Inc. is a financially resilient, well-managed leader with disciplined capital allocation and durable competitive advantages, supported by FY2024 operating cash flow of $35.726 billion, free cash flow of $15.120 billion, conservative leverage, and A-range credit ratings; however, at roughly $102 per share, implying premium multiples near 20.8× EV/EBITDA and 38× P/E, the stock already reflects much of this strength, leaving limited near-term upside amid tariff, inflation, and geopolitical headwinds; therefore, the report assigns B+ (Hold/Market Perform): a high-quality defensive holding for stability and income, but not a compelling entry for outsized capital appreciation at current valuation.
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EdgePoint Analysis 