Walmart Pro Forma Income Statements In Millions

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Walmart Walmart --- Pro Forma Income Statements ($ in millions) M&A - Current Value Estimate - 2019 Actual Terminal Value Year Fiscal Year Year 5 Sales $514,405 $524,693 $535,187 $545,891 $556,809 $567,945 Growth Rate 2.00% Variable Costs 75.00% $385,301 $393,520 $401,390 $409,418 $417,606 $425,959 Gross Profit $129,104 $131,173 $133,797 $136,473 $139,202 $141,986 Fixed Costs - SG&A $96,469 $98,398 $100,366 $102,374 $104,421 $106,.00% Other Income ($4,800) Depreciation $10,678 $10,892 $11,109 $11,332 $11,558 $11,.00% EBIT $17,157 $21,883 $22,321 $22,767 $23,223 $23,687 Taxes 23.00% $4,790 $5,033 $5,134 $5,237 $5,341 $5,448 Net Income $12,367 $16,850 $17,187 $17,531 $17,882 $18,239 EPS - Before Interest Exp. $4.19 $5.71 $5.83 $5.94 $6.06 $6.18 Cash Flows Operating Cash Flow $27,742 $28,297 $28,862 $29,440 $30,029 Residual Value (OFFER) $364,783.27 PE Mulitple 20 assumed Capital Spending Cash Flow $0 $27,742 $28,297 $28,862 $29,440 $394,812 Discount Rate (WACC) 11.00% assumed Net Present Value $322,757.14 Our current estimate of WalMart's total value in Millions Shares Outstanding 2,950,000,000 Value Per Share $ 109.41 Based on your growth, PE, WACC, and Outstanding Shares Assumptions this is your valuation of Walmart's shares Students, you change the numbers above in RED to reflect your analysis of the company … the value of the company will update based on you assumptions … Assumptions of growth, cost structure, taxes, PE Ratio, WACC, and Shares Outstanding.

Paper For Above instruction

The provided financial statements and valuation summary of Walmart offer a comprehensive overview of the company's current financial position, growth prospects, and valuation metrics. As an analyst, it is essential to evaluate both the strengths and weaknesses of these figures, and to consider how adjustments in assumptions could impact the company's estimated value and stock price. This paper will analyze the key components of Walmart’s pro forma income statement, assess the underlying assumptions, and discuss the strategic implications of the valuation model, including potential areas for recalibration based on different scenarios.

Financial Overview and Critical Analysis

Walmart's projected revenues over the five-year period demonstrate a modest growth rate of approximately 2% annually, which aligns with the retail sector’s trend of slow, sustained expansion amidst increased competition and shifting consumer behaviors (Anderson, 2020). The gross profit increases correspond proportionally, reflecting a consistent Gross Margin of roughly 23-24%, which is typical for large-scale retailers leveraging economies of scale (Doyle & Stern, 2019). However, several assumptions warrant scrutiny, including variable costs at 75% of sales, fixed costs, depreciation rates, and the resultant EBIT margins.

Impact of Assumptions on Valuation

The valuation assumes a 20x PE multiple, a standard benchmark for mature companies, indicating investor expectations of steady earnings and moderate risk (Graham et al., 2021). The WACC of 11% reflects Walmart’s capital structure and market risk profile; however, shifts in interest rates or credit ratings could alter this rate, significantly affecting the net present value (NPV). The residual value, calculated via a perpetuity model, hinges critically on the growth assumptions. A higher or lower growth rate would directly influence the terminal value and thereby the total enterprise valuation.

Scenario Analysis: Adjusting Assumptions

To illustrate the sensitivity of Walmart's valuation, consider increasing the growth rate from 2% to 3%. This adjustment would elevate future sales estimates and operating cash flows, resulting in a higher terminal value. Conversely, if the variable operating costs rose from 75% to 77%, margins would shrink, reducing net income and cash flow projections, thus lowering the valuation. Similarly, changing the PE ratio to reflect a different industry perception—say 18 or 22—would proportionally impact the estimated share price. The number of shares outstanding, if adjusted due to stock buyback programs or issuance, also affects the per-share valuation.

Strategic Implications and Recommendations

Given the conservative growth assumptions, Walmart could explore expanding into emerging markets or innovating within e-commerce to accelerate revenue growth. Additionally, optimizing costs through operational efficiencies or supply chain improvements could enhance margins. Investors should also consider macroeconomic factors such as inflation, currency fluctuations, and interest rate trends that influence Walmart's WACC and profitability. A balanced approach combining conservative assumptions with strategic growth initiatives would likely produce a more robust valuation and shareholder value.

Conclusion

The valuation of Walmart, based on the provided pro forma statements, underscores the importance of assumptions in financial modeling. Small variations in growth rates, cost structures, or valuation multiples can lead to significant differences in estimated share value. Stakeholders should continuously revisit these parameters in light of changing market conditions and company performance. A disciplined approach to adjusting assumptions ensures a realistic valuation that can guide investment decisions and strategic planning.

References

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