Hult - Financial Analysis: Walmart Inc. Performance and Strategies

This project presents a comprehensive financial analysis of Walmart Inc., evaluating its performance over three years (2017-2019). The analysis includes an overview of the company, followed by an in-depth examination of various financial ratios, such as profitability, liquidity, efficiency, and valuation ratios. The study compares Walmart's performance with its competitor, Costco, highlighting key differences in financial metrics. Furthermore, the project explores Walmart's strategies, including its focus on price, access, and e-commerce, and its financing activities, such as acquisitions and share repurchase programs. It also addresses the ethical and sustainable aspects of Walmart's business practices. Based on the financial analysis, the project concludes with investment recommendations, suggesting whether investors should buy, sell, or hold Walmart shares, considering both short-term and long-term perspectives.

Running head: WALMART INC. FINANCIAL ANALYSIS
Walmart Inc. Financial Analysis
Name of the Student
Name of the University
Author Note

1WALMART INC. FINANCIAL ANALYSIS
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Company’s Overview.............................................................................................................2
Ratio Analysis........................................................................................................................3
Comparison with Competitor- ‘Costco’.............................................................................6
Strategy and Financing...........................................................................................................6
Ethical and Sustainable aspects of business...........................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9

2WALMART INC. FINANCIAL ANALYSIS
Introduction
In the present competitive era, it becomes necessary to have a better understanding of
numeric value disclosed by the company as their status in their annual report. For good
decision-making, an individual requires to analyze the projected figures and to evaluate them,
also considering their competitors (Cao, Chychyla & Stewart, 2015). One of the techniques
that can be used for a company’s financial analysis is through assessing their past and current
performances with the help of ratio analysis. The company chosen here for preparing the
report is “Walmart Inc.,” which is an American multinational retail corporation. The report
aims to analyze the company’s current position by evaluating its historical data. The
discussion makes a thorough analysis of the company by analyzing its financial performance,
strategies, and growth. Further, the impact of the company’s operations and growth on their
ethical and sustainable aspects have been demonstrated to have a clear view while making
decisions. At last, an appropriate recommendation is given to the investors that are based on
financial analysis in making their decision concerning buy, hold, or sells the shares of the
company.
Discussion
Company’s Overview
Walmart Inc. is an American multinational organization that is engaged in its
working under the retail industry. It is founded in the year 1962, and now it has 11,438 stores
across the world. The company was the largest grocery retailer in the year 2019 and approx.
65% of the return came from US operations (Corporate - US, 2020). Walmart Inc. is a joint-
stock company that is registered with the U.S. Securities and Exchange Commission. The
company employs more than 2.2 million people worldwide. In the year 2019, it has revealed

3WALMART INC. FINANCIAL ANALYSIS
its revenue of $514.4 billion on net income of US$ 6.67 billion and remains a leader in
sustainability, opportunity for employment, and corporate altruism.
Ratio Analysis
Ratio analysis is the basis of financial analysis that helps to gain more in-depth insight
into the company’s financial health (Tan, 2017). The financial ratio analysis of Walmart Inc.
is based on the data presented in its annual report for three consecutive years (2017, 2018and
2019) that are discussed below.
Refer to Excel Sheet 1 (WMT, 2020)
Profitability Ratio

4WALMART INC. FINANCIAL ANALYSIS
The profitability ratio reflects the overall performance as well as the effectiveness of
the company. It measures the ability of the company to generate revenue in context with its
operating costs, equity of the shareholders, and its balance sheet.
Return on Equity Ratio (ROE)
Returnon Equity Ratio=Net Income ÷ Shareholder s' s Equity
Return on equity shows how efficiently the company has utilized and managed the
investor’s fund to generate a positive return. Walmart’s Return on Equity Ratio has shown a
deterioration in the last three years. The recent year 2019 of Walmart has demonstrated a
higher decrease in ROE from its previous two years.
Return on Asset Ratio (ROA)
Return On Asset Ratio=Net Income ÷ Total Assets
Return on Assets Ratio measures the company’s effectiveness in generating a return
from the investment in assets. Walmart’s Return on Asset has shown a constant deterioration
in the last three years in which the year 2019 has shown a higher decrease from its past two
years. However, a higher ratio shows the condition that is more favorable to the investors.
Liquidity Ratio
The liquidity ratio reflects the ability of the company to meet its short-term financial
obligations. An ideal liquidity ratio is considered as 1:1 for the company.
Current Ratio=Current Assets ÷ Current Liabilities
Walmart has a lower increase in its current ratio in the year 2019 as compared to the
year 2018 but it is still low as compared to the year 2017. An ideal current ratio is considered

5WALMART INC. FINANCIAL ANALYSIS
to be as 2:1 for any company. However, the potential creditors of Walmart can find it as less
able to pay off debts.
Quick Ratio= ( Current assets−Inventory−Prepaid Expenses ) ÷ Current Liabilities
The company can repay its current liabilities 0.18 times in the year 2019 using its
liquid assets. This a little increase from the year 2018 has shown a deterioration from its past
year 2017. A ratio of one and more than one is generally favorable for the investors.
Efficiency Ratio
Asset Turnover Ratio=Net Sales÷ Total Assets
The asset turnover ratio reflects the efficiency through which a company is using
its assets to create revenue. However, Walmart has a decreasing rate of its asset turnover ratio
from the last three years, which shows less efficiency.
Inventory Turnover Ratio=Cost of Goods Sold ÷ Average Inventory
Inventory turnover is reflected in the company’s efficiency to control its merchandise,
so it is essential to have a high turn. Walmart is continuously managed to increase its
inventory turnover year by year.
Valuation Ratio
This ratio displays the relationship between the cost of an investment and the benefit
of owning it.
Profit Earning (P/E) Ratio
PE Ratio=Market Value per share ÷ Earning per share

6WALMART INC. FINANCIAL ANALYSIS
P/E Ratio reflects the investor’s willingness to pay for per share (Chawla 2018).
Walmart’s Profit earnings ratio demonstrates a constant increase in the market’s expectations
and the price that the company must pay per unit of its current earnings.
EV/EBITDA
This ratio compares the firm’s Enterprise Value (EV) to its Earnings before Interest,
Taxes, Depreciation and Amortization (EBITDA). Walmart has continuously decreased its
EV/EBITDA from the year past three consecutive years that shows a devaluing position of a
company.
Comparison with Competitor- ‘Costco’
Costco Wholesale Corporation is an American multinational corporation, which is
engaged in the retail industry and operates an online membership-based warehouse club. The
company provides significant value to its customers and falls under the list of Walmart
competitors (Arnold, Beauchamp & Bowie, 2019). Costco has better profitability, liquidity,
efficiency ratios than Walmart in the last three years. The earning per share is far better than
Walmart's. However, Walmart has a higher valuation in the year 2019 from its P/E ratio that
is greater than Costco as well as has broken its past year records.
Costco utilizes technology to offer better products and services to its customers. A
proper amalgamation of technology, value, and individuals contact points makes Costco one
of the fatal competitor of Walmart.

7WALMART INC. FINANCIAL ANALYSIS
Strategy and Financing
Walmart Inc. states its strategy around the sense of price, access, assortment, and
experience that drives the choice of the customer of retailers. The retail industry is becoming
more competitive, especially in terms of e-commerce. Walmart's strategy includes moving
faster to stabilize the customers that are already connected. They are combining the
accessibility of their stores with e-commerce that will save both time and money for them as
well as for their customers.
Walmart’s business strategy focused on its everyday low costs or prices. The
company sells a large variety of products and tends to sell its product at a lower price in the
market. Walmart understands the needs and wants of millions of their customer that are
required three points to be considered by the convenient company, low costs, and quality of
the product.
Walmart has acquired several companies in the last three years. Walmart has acquired
‘Parcel’ in the year 2017 to speed up their delivery, and ‘Flipkart’ by investing $16 billion in
the year 2018. Further, it has acquired ‘Cornershop,’ ‘Eloquii,’ and ‘Bare’ in the year 2018.
The company has invested in acquiring ‘Polymorph’ and ‘Aspectiva’ in the year 2019 to
scale up its ad business and serve the customer to the best.
Moreover, Walmart declares an additional $20 billion share repurchase program
which replaced its current authorization. It believes to use the recent authorization over two-
year approximately.
Ethical and Sustainable aspects of business
For Walmart Inc., personal and moral integrity is one of their fundamentals, and they
consider that it will have to start with each individual. The company’s culture of ethics and
integrity reflects in their attitudes and conducts which helps them to create an honest, fair and

8WALMART INC. FINANCIAL ANALYSIS
compliant workplace. The ethical belief of the company defines the way to treat with one
another, their suppliers, and customers (Nygaard et al., 2017). The company believes in low
costs and low prices for every day but only through accomplishing their daily integrity.
Walmart takes its decision for their operations while complying with laws and policies. Thus,
it serves its customers combined with ethical and legal aspects for their business in their best
way.
Walmart consists of the resources that help them to promote and recognize the ethical
choices (Corporate.walmart.com, 2020). The resources include a global helpline, global case
management system, and process, ethics website, as well as integrity in action awards, which
helps them to achieve their ethical aspects of the business.
Walmart initiates to enhance its sustainability of operations and global value chains
through improving their environmental and social aspects (Song, Wang & Zhu, 2018). It
complies with applicable environmental and law regulations that cover a wide range of
environmental issues. The company includes regulatory compliance for waste and recycling,
hazardous material transportation, water, air, and land-use. There focus on creating zero
waste, operations undergoing 100% renewable energy, and on selling the products that can
sustain their resources as well as the environment. Walmart is maintaining its sustainable
aspects by contributing towards the environment and, ultimately, to society.
Conclusion
Walmart has maintained its position in the market through its ethical conducts and
efficient services provided to the customers. After the financial analysis of the Walmart, it
can be say that the investors who is willing to have profit in the short period then it is
suggested to not buy any additional shares. However, company’s investments in e-commerce

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have a view to give huge profits in the long period. Therefore, it can be long-term buy for the
investors or can hold the shares for benefit in future.
References
Arnold, D. G., Beauchamp, T. L., & Bowie, N. E. (2019). Ethical theory and
business. Cambridge University Press.
Cao, M., Chychyla, R., & Stewart, T. (2015). Big Data analytics in financial statement
audits. Accounting Horizons, 29(2), 423-429.
Chawla, G. K. (2018). SUCCESSFUL COMPANIES'PERFORMANCE IN
TODAY'S VOLATILE MARKETS. Journal of Business and Behavioral
Sciences, 30(1), 27-37.
Corporate - US. (2020). About Us. Retrieved 14 February 2020, from
https://corporate.walmart.com/our-story
Corporate.walmart.com. (2020). Retrieved 14 February 2020, from
https://corporate.walmart.com/media-library/document/2019-environmental-
social-governance-report/_proxyDocument?id=0000016c-20b5-d46a-afff-
f5bdafd30000

10WALMART INC. FINANCIAL ANALYSIS
Investor.costco.com. (2020). Retrieved 14 February 2020, from
https://investor.costco.com/static-files/05c62fe6-6c09-4e16-8d8b-
5e456e5a0f7e
Nygaard, A., Biong, H., Silkoset, R., & Kidwell, R. E. (2017). Leading by example:
Values-based strategy to instill ethical conduct. Journal of Business
Ethics, 145(1), 133-139.
Song, Y., Wang, H., & Zhu, M. (2018). Sustainable strategy for corporate governance
based on the sentiment analysis of financial reports with CSR. Financial
Innovation, 4(1), 2.
Tan, Z. (2017). Application of Discounted Cash Flow Model Valuation–Wal-
Mart. Available at SSRN 3100702.
WMT. (2020). Retrieved 14 February 2020, from
https://s2.q4cdn.com/056532643/files/doc_financials/2017/Annual/WMT_201
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WMT. (2020). Retrieved 14 February 2020, from
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