Wal-Mart Stores, Inc. (WMT)
Discount cash flow analysis
5% margin of safety What's this?
Price history
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $55.53 | $54.40 | $53.30 | |
| Terminal Growth% | 0 | $56.04 | $54.88 | $53.77 |
| +1% | $56.55 | $55.37 | $54.24 |
How does a change in discount rate or terminal growth affect valuation?
This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate
Valuations and comments
- Valuecruncher created a new valuation of $51.70 (overvalued by 7.58%) - 2 hours ago
- GordonGekko created a new valuation of $51.50 (overvalued by 2.72%) - 1 month ago
- michaeljk2 created a new valuation of $50.99 (undervalued by 2.64%) - 4 months ago
- michaeljk2 created a new valuation of $77.32 (undervalued by 55.64%) - 4 months ago
- michaeljk2 created a new valuation of $194.44 (undervalued by 291.38%) - 4 months ago
- michaeljk2 created a new valuation of $138.21 (undervalued by 178.2%) - 4 months ago
- jcook62 created a new valuation of $79.21 (undervalued by 61.39%) - 5 months ago
- germas88 created a new valuation of $55.01 (undervalued by 13.4%) - 10 months ago
- SethWellbourne created a new valuation of $43.60 (overvalued by 15.77%) - 11 months ago
- dweis created a new valuation of $39.90 (overvalued by 24.32%) - 1 year ago
- TheCrunchBlog created a new valuation of $54.88 (overvalued by 6.75%) - 1 year ago
- Diegoengel created a new valuation of $51.57 (overvalued by 10.23%) - 1 year ago
- GordonGekko created a new valuation of $59.35 (undervalued by 5.6%) - 1 year ago
- TheCrunchBlog created a new valuation of $51.71 (overvalued by 7.99%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 259,168 |
| Net Debt (Long-term borrowings less cash): | 39,102 |
| Equity Value: | 231,514 |
| Number of Shares Outstanding: | 3,933,000,000 |
| Calculated value per share: | $54.88 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
Where:
- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate
To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.
Where:
- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate
The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.
Where:
- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium
Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/10/running-the-numbers-wal-mart-wmt-looks-expensive/
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.