EQUITY RESEARCH IN FOOD RETAIL INDUSTRY: THE CASE OF WALMART INC

Walmart Inc is a retailer that operates physical retail and wholesale stores including supercenters, discount stores, neighborhood markets and membership-only warehouse clubs. It also operates eCommerce websites like walmart.com and samsclub.com. The company is divided in three main segments: Walmart US, Walmart International and Sam’s Club. Walmart is the leader of the food retail industry, its revenue presented a compound annual growth rate (CAGR) of 3.34% in the fiscal period 2017-2022 and it is expected to achieve a CAGR of 2.74% during the forecasted fiscal period 2023-2028. The company is focusing on the expansion of the level of investment related to technology, automation and supply chain and it is also focusing on growth initiatives and on the development of its ecosystem. On the other hand, Walmart has been implying low liquidity, and has been involved in some legal issues. In terms of valuation, the Discounted Cash Flow (DCF) method was performed (free cash flow to the firm approach) to value Walmart and to complement this approach, other methods were also applied including the relative valuation (RV) with the multiples EV/EBITDA next twelve months (NTM), EV/Sales NTM and P/E NTM. The final recommendation for Walmart Inc (WMT) is a HOLD, with a 2023 year end (YE) price target of $ 139.47 using the FCFF method, implying 5% of upside potential from the July 25th, 2022, closing price of $ 132.21 per share, with medium risk.