Valuecruncher Valuation Reports include three approaches to valuation: economic (DCF), comparable and accounting (NTA). This newsletter discusses the role comparable company analysis plays in valuation.

Where DCF (discounted cash flows) and NTA (net tangible assets) focus on the specific characteristics of the company being valued comparable company analysis uses a relative approach. This relative approach values the company based on the market valuation of similar companies.

Comparable company valuation uses the valuation ratio of a publicly traded company or from the sale of a company and applies that ratio to the company being valued. The valuation ratio typically expresses the valuation as a function of a measure of financial performance (e.g. revenue, EBITDA or EBIT), occasionally operating metrics such as number of employees, customers or register users will be used in valuation ratios. The valuation figure used generally reflects the enterprise value (EV) or the value of the equity in the business; the equity value is usually represented by the share price.

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Valuecruncher has placed a mid-point valuation of $47.12 per share with a range of $41.52 to $52.87 for the WalMart. WalMart was trading at $46.95 at the close on Friday 30 March. 

The Valuecruncher mid point valuation produces and EV-EBIT multiple of 10.5, this is slightly higher than the current trading multiple of 10.4. WalMart is currently trading at a lower EV-EBIT multiple than it’s major US competitors Target (12.0) and Costco (12.7). 

Valuecruncher has forecast short term revenue growth of 12.5% and maintained the current EBIT margin of 6%. 

Valuecruncher has used a cost of capital (WACC) of 8% for WalMart.

Long-term growth is forecast at 3.8%.    

Valuecruncher Valuation Report - WalMart