Running The Numbers – Wal-Mart ($WMT) Looks Expensive
With all of the losses this week in the markets we change tack to look at a company that isn’t trading near a 52-week low but closer to their 52-week high. Valuecruncher has previously completed a valuation of $WMT. With $WMT trading around US$60.00 we thought it was time to update our valuation.
Valuecruncher produces a valuation of US$54.88 for $WMT. This is a current valuation not a target price. This valuation is 6.75% below the current share price of US$58.85.
Our assumptions are revenues of US$408.0 billion in 2008 growing to US$470.0 billion in 2010. We have used a flat EBITDA margin of 7.5% to 2010. Our terminal growth rate is 3.5%. We used a terminal capital expenditure number of US$14.5 billion. Our WACC (discount rate) is 8.0%. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation. Our analysis incorporates the cash and debt on the $WMT balance sheet – Valuecruncher calculates a net debt number.
Our valuation is sensitive to the discount rate assumption. If we drop the discount rate to 7.5% then the valuation rises to US$62.84 6.78% above the current share price of US$58.85.
Based on our analysis and assumptions the current share price looks slightly expensive. Play with our assumptions – what does your analysis say?