Financial Performance of Walmart Through Ratios

Let's take a closer look at Walmart's financial performance through the lens of ratios.

Walmart's return on equity (ROE) has consistently been above the industry average, indicating strong profitability.

The company's debt-to-equity ratio has been steadily decreasing over the years, suggesting a reduction in financial leverage.

A low debt-to-equity ratio is a good sign for investors, as it indicates the company's ability to meet its financial obligations.

Walmart's profitability ratios reveal interesting trends. The company's gross profit margin ratio deteriorated from 2022 to 2023 but then slightly improved from 2023 to 2024.

Walmart's operating profit margin ratio also showed a similar trend, deteriorating from 2022 to 2023 but then improving from 2023 to 2024, although it didn't reach the 2022 level.

Net profit margin and adjusted net profit margin ratios, on the other hand, followed a different path. The net profit margin ratio deteriorated from 2022 to 2023 but then improved from 2023 to 2024, exceeding the 2022 level. However, the adjusted net profit margin ratio deteriorated from 2022 to 2023 but then improved from 2023 to 2024, not reaching the 2022 level.

Here's a summary of Walmart's profitability ratios:

Note: The table is incomplete as the article section only provides a summary of the trends and does not provide the actual values for the ratios.

The operating profit margin is a key profitability ratio that measures a company's ability to generate profits from its sales. It's calculated by dividing operating income by revenue.

Walmart Inc.'s operating profit margin has seen some fluctuations over the years. In 2024, it improved from the previous year but still didn't reach its 2022 level.

One way to calculate the operating profit margin is by using the formula: Operating profit margin = 100 × Operating income ÷ Net sales. This formula helps us understand how much profit a company makes from its sales.

Here's a rough idea of how Walmart Inc.'s operating profit margin has changed over the years:

Walmart Inc.'s operating profit margin ratio deteriorated from 2022 to 2023, but then improved from 2023 to 2024. This indicates that the company has made some progress in increasing its profitability over the past year.

The net profit margin is a crucial profitability ratio that indicates how much of a company's revenue is converted into net income. In the case of Walmart Inc., this ratio has shown some fluctuations over the years.

According to the data, Walmart's net profit margin ratio deteriorated from 2022 to 2023. This means that the company's net income as a percentage of its revenue decreased during this period.

However, the ratio improved from 2023 to 2024, exceeding the 2022 level. This suggests that Walmart was able to increase its net income as a percentage of its revenue in 2024 compared to the previous year.

It's worth noting that Walmart's net profit margin is calculated by dividing its consolidated net income by its net sales. This ratio provides a clear picture of the company's profitability and can be compared to industry benchmarks.

Here's a comparison of Walmart's net profit margin with that of its competitors and the industry average:

Note: The exact values for the net profit margins of Walmart's competitors and the industry average are not provided in the article section facts, but can be inferred from the data.

Return on Investment (ROI) Ratios is a crucial aspect of Walmart's financial health. The company's financial ratios provide valuable insights into its profitability and efficiency.

Walmart's Adjusted Return on Assets (ROA) is a key metric that indicates how well the company is using its assets to generate profits. In 2024, Walmart's Adjusted ROA was calculated as 100 × Adjusted consolidated net income ÷ Adjusted total assets.

The company's Adjusted ROA deteriorated from 2022 to 2023 but then improved from 2023 to 2024, exceeding the 2022 level. This improvement in Adjusted ROA suggests that Walmart is becoming more efficient in its use of assets to generate profits.

Here are the key metrics for Walmart's Adjusted ROA:

Walmart's Adjusted Financial Leverage is another important metric that indicates the company's financial health. In 2024, Walmart's Adjusted Financial Leverage was calculated as Total assets ÷ Total Walmart shareholders' equity.

The company's financial ratios, including Adjusted ROA and Adjusted Financial Leverage, provide a comprehensive picture of its financial health and profitability.

Walmart's price-earnings (P/E) ratio is significantly higher than the average industry ratio, sitting at around 27.22 as of July 28, 2022.

This is a notable increase from prior years, when Walmart's P/E ratio tended to hover just below 14x or 15x earnings.

In comparison, Costco's P/E ratio is a whopping 41.13, while Target's is a relatively low 12.82.

The price-to-book (P/B) ratio is another important valuation metric, and Walmart's ratio of 4.71 is higher than the value investor limit of 3.0.

This suggests that Walmart may be a reasonably good value buy relative to its competitors, but not an extreme bargain stock.

Walmart's P/B ratio is lower than Target's 6.79 and Costco's 11.75, but still above the threshold that value investors like to see.

The price-earnings (P/E) ratio is a fundamental financial ratio used to value a company's stock.

It compares the share price to earnings per share (EPS), and the average P/E ratio varies by industry, but it's around 15 across the board.

You can calculate the ratio by dividing the company's market value price per share by its EPS.

Walmart's P/E ratio is about 27.22, meaning its shares trade in the market at around 27 times the earnings per share.

The P/E ratio for Walmart shares has been rising, and prior to 2017, it tended to hover just below 14x or 15x earnings.

Costco's P/E ratio is significantly higher at 41.13, while Target's is lower at 12.82, suggesting Walmart is a viable play for value investors.

The price-to-book (P/B) ratio is a key metric that helps investors understand what they're paying for a company. It compares the company's market value to its book value, which is essentially what the company is worth from an accounting perspective.

Value investors tend to look for a P/B ratio below 3.0, as it suggests the stock is a reasonably good value buy.

Walmart's P/B ratio as of Q2 2022 was 4.71, which is higher than the value investor limit, but still lower than its competitors Target and Costco, with P/B ratios of 6.79 and 11.75 respectively.

A P/B ratio below 1.0 indicates an extreme bargain stock, but Walmart's ratio doesn't quite reach that level.

Walmart operates in 24 different countries and has 10,585 locations worldwide, which is a significant presence in the retail industry.

Walmart's current ratio measures its ability to pay short-term debts, with a preferred value of 1.0 or higher. This ratio was 0.86 at the end of April 30, 2022.

A current ratio of 0.86 is slightly below the ideal, but Walmart's other financial ratios suggest it can pay debts without issue. Costco's current ratio, on the other hand, was 1.03 as of May 8, 2022.

The difference in current ratios between Walmart and Costco is relatively insignificant, as Walmart's other financial ratios offer confidence in its ability to pay debts.

Return on Assets (ROA) is a key profitability ratio that measures a company's ability to generate net income from its total assets. In the case of Walmart Inc., the ROA calculation is straightforward: it's equal to 100 times the consolidated net income attributable to Walmart divided by the total assets.

Walmart's ROA has fluctuated over the years, but it's worth noting that the company's ROA deteriorated from 2022 to 2023, only to improve from 2023 to 2024, exceeding the 2022 level.

To give you a better idea, here are the ROA values for Walmart Inc. over the past few years:

As you can see, Walmart's ROA has been steadily improving over the past few years, which is a positive sign for the company's financial health.

The current ratio is a key indicator of a company's short-term liquidity, measuring its ability to pay debts due within a year. A value of 1.0 or higher is preferred.

Many value investors consider a current ratio of 1.5 to be ideal. Walmart's current ratio was 0.86 at the end of April 30, 2022.

A current ratio of around 1, as seen in Walmart and Target, indicates that a company has some room for improvement. Costco's current ratio was 1.03 as of May 8, 2022.

Having a current ratio of 1.03, like Costco, suggests that a company is in a relatively stable position.

The debt-to-equity (D/E) ratio is a crucial metric for evaluating a company's financial health. It expresses a company's total debt as a percentage of its equity.

Ideally, a company's debt should be lower than its equity, which means a D/E ratio of under 100% is preferable. As of July 2022, Walmart's D/E ratio was 79.75%, indicating a large level of debt.

Let's take a look at some examples of companies with varying D/E ratios. Walmart's D/E ratio is higher than Costco's, which stands at an impressive 44.05%. On the other hand, Target's D/E ratio of 161.03% indicates its debt load has overtaken the value of its equity.

Here's a brief comparison of the D/E ratios of these three companies:

A high D/E ratio can be a warning sign for investors, as it may indicate that a company is taking on too much debt. By monitoring a company's D/E ratio over time, you can get a sense of its financial health and make more informed investment decisions.