Beyond Low Prices: Is the Retail Giant Now Too Expensive?

[View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top Grocery Stock Searches in the Last Month Rank Ticker Name Searches #1 [TGT]( Target 19 #2 [COST]( Costco Wholesale 18 #3 [WMT]( Walmart 15 #4 [DG]( Dollar General 4 #5 [KR]( Kroger Company 3 #ad [Master the Art of Investing with The Juice!]( Brought to you by [Stansberry Research]( [AI Warning: A Strange Force Overtakes U.S. Stocks]( [Stansberry Research - AI Warning: A Strange Force Overtakes U.S. Stocks]( Money managers might tell you it’s impossible to perfectly time a market crash. But one former hedge fund manager CNBC calls “The Prophet” is stepping forward to prove them wrong. Whitney Tilson has accurately predicted nearly every major market crash of the 21st century – often to the exact day. With this eerie track record, you can see why Tilson successfully tripled his clients’ money during his time on Wall Street. 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It makes us wonder whether Walmart’s shares are too expensive. Walmart’s Business Founded in 1962 by Sam Walton, Walmart has grown from a single discount store in Arkansas to a global powerhouse known for its "Everyday Low Prices" strategy. As the world’s largest retailer, Walmart operates over 10,500 stores in 19 countries, serving 255 million customers weekly through its extensive network of supercenters, discount stores, and e-commerce platforms. The company’s vast product range includes groceries, apparel, electronics, home goods, and more. Recently, it expanded into healthcare, financial services, and digital advertising, leveraging its massive scale and customer base. Walmart segments its business into the following areas: - Walmart U.S. (68% of total revenues) - Includes supercenters, discount stores, neighborhood markets, and e-commerce operations in the United States. - Walmart International (18% of total revenues) - Encompasses retail operations in 18 countries outside the U.S., including Mexico, Canada, and China. - Sam's Club (14% of total revenues) - Operates membership-only warehouse clubs across the U.S. and select international markets. [Revenue] Source: Walmart Q2 2025 Investor Presentation E-commerce helped Walmart’s margins continue to expand, with its gross profit rate hitting 24.4% in the latest quarter. Operating expenses fell QoQ from 20.8% to 20.6%. This helped improve adjusted EPS from $0.61 to $0.67 YoY for the quarter. Unlike consumer discretionary companies like McDonalds or Starbucks, Walmart says they haven’t seen a pullback in consumer spending. This puts them in a great spot with inflation finally receding. Financials [Financials] Source: Stock Analysis Despite its size, Walmart continues to improve sales at or over 5% annually while maintaining gross margins. At the same time, its e-commerce push has helped it slowly improve operating and profit margins. Walmart has also managed to keep its debt load to 1.4x EBITDA, with total debt just above $60 billion. With free cash flow of just under $8 billion, the company has plenty of coverage for its 1.13% dividend and smaller yield share buybacks. Valuation [Valuation] Source: Seeking Alpha Walmart’s latest run emphasizes its premium price. Its stock trades at 31x forward earnings, twice most of its peers, and the second most expensive behind Costco (COST). This is true of its price-to-cash-flow ratio as well. Dollar General’s (DG) stock does come close to matching Walmart on an enterprise value to EBITDA basis. But that only serves to highlight Dollar General’s 3.4x debt to EBITDA ratio, more than twice Walmart’s. Growth [Growtj] Source: Seeking Alpha Next to Costco, no other retailer in this group has shown sales growth like Walmart. And it's not just a recent phenomenon. The company has kicked out over 5% on average for the last five years. Meanwhile, Walmart has seen its free cash flow margins decline over the past few years, whereas only Kroger (KR) saw improvement. Profitability [Profit] Source: Seeking Alpha Walmart’s margins aren’t the best. But they’re pretty darn good. However, because it focuses on commodity sales like food and gas, its margins are naturally lower than those of Target (TGT). Yet, the free cash flow margin could be better, especially when you look at Costco’s performance. [LOCK IN Annual Income Returns as High as 11.1% for Life]( If investors and retirees are worried about running out of money in retirement... they should be! According to the Survey of Consumer Finances (SCF), nearly half of all U.S. households have no money at all saved for retirement. 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