Description
This my project I need someone professional to make it, I will upload 1 files include the balance sheet and the income
the T-bill in 10 years =2.084
stock market =93.15
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
Ready!I marked it as complete, but as I told you, you are granted the editions your teacher requires for free.
Running head: WALMART STOCK VALUATION PROJECT
Walmart Stock Valuation Project
[Author Name(s), First M. Last, Omit Titles and Degrees]
[Institutional Affiliation(s)]
Author Note
[Include any grant/funding information and a complete correspondence address.]
1
WALMART STOCK VALUATION PROJECT
2
Walmart Stock Valuation Project
Report Objective
Facing the opportunity of investing, individuals need to decide which stocks have the best
chance of generating profits. Investors use different methods to analyze the value of an
investment. Stocks, besides being a ready for trade and able to generate big profits or colossal
loss, if held can be an investment that grows with time, paying dividends periodically to
shareholders. Dividends are the distribution of the profits of the company during a given period.
There can be cash dividends or stock dividends. However, the firm issuing the shares can
distribute its profits in different ways, or invest them in the same company or buying shares of
different companies. Nevertheless, stocks are an asset, and they need to be valuated, to decide if
whether or not they are profitable.
The aim of the report is to present different methods of valuating stocks and apply them
to Walmart Inc. to decide to invest or not on it. The report will describe the most popular
methods of stock valuation: The Dividend Discount Method (DDM) and the Dividend Growth
Model (DGM.
Firm Overview
Fifty years ago, Walmart Inc. started with one discount store and the idea of selling more
products at a lower price. The growth of the company has positioned the firm as one of the
largest retailers in the world. According to its Income Statement, in 2018 the sales of the
company reached $500.3 billion. Besides, the firm is recognized as a leader in sustainability,
corporate philanthropy and employment opportunity. (Walmart Inc., 2019) During the period
2015-2016, Walmart Inc. invested $2.7 billion on wages, benefits, and training for U.S.
associates. (Walmart Inc., 2016) Located in 28 countries, Walmart Inc. has over 11,530 stores all
WALMART STOCK VALUATION PROJECT
3
around the globe, generating over $500 billion in revenue, from 260 million weekly customers
and 40 million online visits.
Industry Analysis
The industry of discount stores provides similar products as department stores, but a
lower cost. As their more expensive counterparts, they are similar in total size, layout, and
products, which are displayed in different zones of the store, with a centralized zone of checkout
at the front of the store. Even, some specialized departments can have separate checkout. They
sell a large variety of goods, although some of them have specific focus on different items. They
have a specific target, the lower part of the middle-income families. The demand of this type of
stores depends on the spending habits of the population. They profit is based on their ability to
offer competitive prices while increasing their revenue per square foot. Smaller companies only
satisfy particular niche markets, while bigger companies use their power to bargain for lower
cost of the merchandise due to their massive purchases. (MarketResearch.com, 2019)
Sales of
discount
stores
worldwide
from 2008
to 2018 (in
billion U.S.
dollars)
(Statista.com, 2018)
WALMART STOCK VALUATION PROJECT
4
Stock Valuation
The value of a company lies on the amount of free cash flow that can provide during its
lifetime. However, the value of future money is not the same as the value of the money that can
provide today. So, the future cash flows need to be discounted at an appropriate rate. Then, the
formula to calculate the value of one part of the company is
𝑂𝑛𝑒 𝑠ℎ𝑎𝑟𝑒 =
𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑠ℎ (𝑛𝑜𝑤 𝑎𝑛𝑑 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑)
𝑇𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠
The intrinsic value of the stocks is related to the expected revenue. However, the investor
does not know how much money a company will have in several years from today. There are
several methods to calculate the value of a stock: The Discounted Cash Flows (FCF), the
Dividend Discount Method (DDM) and the Dividend Growth Model (DGM). Each one of them
takes into account different characteristics and behaviors of the company to value the stock.
Discounted Cash Flows
To calculate the intrinsic value using the DCF, we will use the value of the actual free
cash flow and the growth rate.
𝐹𝑢𝑡𝑢𝑟𝑒 𝑉𝑎𝑙𝑢𝑒 = 𝐹𝐶𝐹 ∗ (1 + 𝐺𝑅)
That will give us the Future Value of the FCF for the next year, and use the value
obtained to calculated the year next to next year expected FCF, and so on. However, we can use
the next formula:
𝐹𝑢𝑡𝑢𝑟𝑒 𝑉𝑎𝑙𝑢𝑒 𝑛 𝑦𝑒𝑎𝑟𝑠 = 𝐹𝐶𝐹 ∗ (1 + 𝐺𝑅)𝑛
Once we calculated the future value of the Cash flows, we need to calculate their Present
value, applying the Discount Rate (DR)
𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒𝑑 𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑉𝑎𝑙𝑢𝑒 =
𝐹𝑢𝑡𝑢𝑟𝑒 𝑉𝑎𝑙𝑢𝑒
(1 + 𝐷𝑅)𝑛
WALMART STOCK VALUATION PROJECT
5
This is an absolute way of calculating the intrinsic value of a company, because it relays
on the given information. Under the DCF approach, the intrinsic value of a stock is calculated by
discounting the company’s free cash flows to its present value.
Ticker
Intrinsic Value
WMT
$ 82
Company info
Name
Industry
Market Cap (mil)
Exchange
Walmart Inc
Discount Retail
$ 315.104,00
NYSE
Inputs
Cash and Short Term
Investments
$ 6.756,00
Cash from Operating Activities
$ 26.155,00
Capital Expenditures
-$ 10.731,00
Free cash flow (mil $)
$ 22.180,00
Shares outstanding (mil)
2855,00
Return on Equity
11,66%
Growth rate
3.69%
10.00%
Margin of Safety
Conservative growth rate
3.32%
Growth decline rate
5.00%
9.00%
13.5
Discount rate
Valuation last FCF
Calculations
Year FCF * Growth rate
NPV FCF
1
$15,936.23
$14,620.40
2
$16,439.01
$13,836.39
3
$16,931.72
$13,074.40...
Review
Review
