WALMART INC (NYSE:WMT) – A Quality Stock with Strong Fundamentals
By Mill Chart
Last update: May 13, 2025
WALMART INC (NYSE:WMT) stands out as a potential candidate for quality investors, meeting key criteria in profitability, financial health, and operational efficiency. The company’s fundamentals reflect stability and consistent growth, making it a noteworthy pick for long-term investors.
Why WMT Fits the Quality Investing Criteria
- Strong Profitability: Walmart’s Return on Invested Capital (ROIC) of 17.12% (excluding cash and goodwill) is well above the 15% threshold for quality stocks, indicating efficient use of capital. The company also maintains solid margins, with an operating margin of 4.31%, outperforming 82.93% of its industry peers.
- Healthy Debt Management: The Debt-to-Free Cash Flow ratio of 3.62 suggests Walmart can repay its debt in under four years using current cash flows, a sign of financial discipline.
- Consistent Growth: While revenue growth has been modest (4.08% 5Y CAGR), EBIT growth (6.45% 5Y CAGR) outpaces sales growth, reflecting improving operational efficiency.
- High Profit Quality: Walmart converts 110.16% of net income into free cash flow (5Y average), indicating strong earnings quality and cash generation.
- Stable Dividend: The company has paid dividends for over a decade without cuts, supported by a sustainable payout ratio of 34.41%.
Valuation Considerations
Walmart’s current valuation is on the higher side, with a P/E ratio of 38.55, above both industry and S&P 500 averages. However, its strong profitability and defensive business model may justify the premium for quality-focused investors.
Fundamental Analysis Summary
Walmart scores 5/10 in our fundamental analysis, with strengths in profitability and financial health offset by a rich valuation. The company ranks highly in ROIC and margins but faces minor liquidity concerns due to lower current and quick ratios.
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Disclaimer
This is not investing advice. Always conduct your own research before making investment decisions.
