Walmart due diligence.

Hatchworks has conducted due diligence on Walmart, the world’s leading distribution group worldwide that operates a chain of hypermarkets, discount department stores, and grocery stores. The company provides a selection of consumer products as well as photo, financial, wireless, and pharmacy services.

Headquartered in Bentonville, United States, Walmart is listed on the New York Stock Exchange, under the symbol ‘’WMT’’.

Financials — Walmart
(Source: Marketscreener.com, investing.com)

Walmart’s current market cap is $375B and stock price is around $131.

With a predicted net-income loss of -3.9% for 2020E and 2021E, and a net income estimate for 2021E of in excess of $14.2B, this points to a P/E ratio of 25.9x.

The revenue/sales forecast is $537.8B for 2021E, indicating an EV/Sales ratio of 0.79x.

In terms of profitability, an operating margin of 4.17% is predicted for 2021E. This is moderately lower than competitors such as Dollar Tree Stores (DLTR), for example, who has a higher operating margin of 6.62% for 2021E.

Walmart is a yielding equity with a yield of 1.73% for 2021E.

It is worth noting that, after the previous recession, the shares sold-off around 22.3%. During the current rough earnings season, it is hard for investors to keep hold of shares in companies with high trading valuations. Heavy operating and somefinancial leverage, plus political pressure for large companies to maintain payrolls, may drive earnings much lower at many popular companies.

However, Walmart has seen a massive surge in online shopping (e-commerce) since the pandemic began. Data shows site traffic has jumped 21% since February and is double what it was a year ago. Food makes up 56% of Walmart’s revenue at U.S. stores. Also, Walmart created a Grocery app that becomes part of the Walmart app that’ll make it easier for consumers to order a wide variety of products at once. This plays well into the Covid-19 driven hoarding exercise that is sweeping the globe (esp. America) as consumers stock staples and food in times of great uncertainty.

It is worth noting that Walmart is facing a lawsuit regarding two Walmart grocery store employees who have sadly died from Covid-19 due to a lack of heath and safety policies. The lawsuit is still under investigation and so far it hasn’t shown any negative effect on Walmart’s share price.

According to our analysis, Walmart operates in a defensive sector, showing a stable dividend history. Along with this pandemic, it bodes well for Walmart due to its emphasis on e-commerce expansion and online sales. Overall Hatchworks maintains Walmart on its radar, having recently held its shares until the recent run up and will look to time a later entry should market weakness make valuations more attractive later.

The Hatchscore is 4.4 out of 10. Full details can be found on Hatchnet: www.hatch-net.com/companies

What is Walmart?

Walmart is the world’s leading distribution group worldwide that operates a chain of hypermarkets, discount department stores, and grocery stores.

Big Investors:

• Walton Enterprises, LLC.
• The Vanguard Group, Inc.
• Capital Research & Management Co.
• BlackRock Fund Advisors.

Advisors and Bookrunners:

• Barclays.
• BofA Merrill Lynch.
• Citigroup.

What are the risks?

• Risks associated with the suppliers from whom Walmart’s products are sourced could affect their financial performance.
• Changes in Walmart’s results of their retail pharmacy business could adversely affect their operation profitability.
• Walmart is subject to certain legal proceedings which include consumer, employment, tort and other litigation that may affect their financial performance.

Competitors:

• Target. (TGT)
• Costco. (COST)
• Dollar Tree Stores. (DLTR)

Management team:

• Doug McMillon: President and CEO.
• Dan Bartlett: Executive Vice President, Corporate Affairs.
• Brett Biggs: Executive Vice President and CFO.

The Hatchworks Team

The forecast figures are based on the data of Marketscreener.com, and not from hatchworks: https://www.marketscreener.com/WALMART-INC-4841/financials/

Legal Disclaimer — This report summary has been generated as a result of Hatchworks’ proprietary company vetting and filtering system. The level of due diligence conducted on investible assets conducted ranges from mediocre to significant, the latter being the case where Hatchworks has explicitly taken strategic positions in. By no means is the information in this file to be relied on as investment advice; this includes Hatchworks’ algorithmic composite score known as ‘Hatchscore’. Hatchworks has not received any compensation for this research. For more information you can reach us at info@hatchworksvc.com. This report is not for distribution in the United States of America. It is closed to U.S citizens. If you are a U.S. citizen, you should delete this report or return to sender.