Financial Exploration Of Walmart Company
Introduction and Overview
Ever wonder how to determine what company is worth investing in. There are several factors one can go off of but the true answer lies in the company's financial statements. Every publicly traded company should have some sort of financial statements that shows their revenue, liabilities and most importantly the amount of dividends they are paying to their shareholders. So if you want to invest in a company, I suggest you start digging. Let take Walmart, Inc. for example and see where we end up.
Walmart Company has been in business for over 50 years. It operates globally in more than 11,700 stores in 28 countries. It employs, to date, 2.2 million workers around the world and serving about 270 million customers in just one week alone. Its entity provides a wide range of retail products and services worldwide. In the fiscal year ending January 31, 2018, Walmart's revenue was totaled at $500.3 billion making it possible to payout dividends to shareholders totaling $6.1 billon. Those numbers alone speaks volume on how Walmart, Inc. is successfully running their business. We would want to look further into Walmart's financially to get more in-depth knowledge of how the company is performing overall. With the helping of Walmart's auditing firm of 45 plus years, Ernst & Young LLP, I can assess a number of consolidated financial statements. In Walmart's Form 10-K, I assess the following financial statements, below, to draw conclusions on the company's financial position and whether or not it would be a good investment.
Financial Analysis
Walmart has three different segments, Walmart U.S., Walmart International and Sam'sClub. Walmart U.S consist of all the Walmart stores, Supercenters and distribution centers whereas Walmart International are the countries outside the U.S that Walmart operate in. Sam's club is intended for small businesses and individuals. Walmart uses all three inventory methods collectively across its segments. For all retail inventory in the U.S segment, Walmart uses the last-in, first out method. The retail inventory for Walmart International uses the first-in, first-out method and for the Sam's Club segment, it uses the last-in, first out weighted-average method.
Walmart does not have any intangible assets included in the report leaving it with no carrying value on the balance sheet. They also do not have any preferred or treasury stock to account for. However, their common stock decreased a little coming in at 295 billion shares from last year's 305 billion shares. At the fiscal year ending January 31, 2018, 2.92 billion shares were outstanding with the closing market price at $106.60 per share. So let's calculate the price to earnings ratio for the year. This will be the market price value per share divided by the earnings per share. So Walmart's market price value per share was $106.60 and we divide that by the year-end earnings per share of $3.28. This gives us a price to earnings of 32.50. In knowing this, Walmart was able to payout its shareholders a total of $6.1 billion in dividends valued at $2.04 per share ($0.51 per quarter). What does this say about Walmart financial state? We soon will know but as I looked at the recent closing price for Walmart common stock, it was down $12 since the fiscal year ended coming in at $94.59 per share.
I wouldn't shut Walmart down just yet as they are making good moves with their cash flow and investments. Ending the year, Walmart's operating activities for working capital, payments and tax regulations, they were able to generate $28.3 billion in free cash flow. Walmart was able to make $9.1 billion in investing activities toward the use of store remodels, additions and expanding eCommerce. Walmart also had a 19.9 billion in financing activities, which a large amount was contributed to repayments of long term debt, but was a 4.21% increase from fiscal year ending 2017. (Consolidated Statement of Cash Flow Pg. 59, Form 10-K, Walmart, Inc. Jan. 2018) I have computed several different ratio analysis to give me more insight on Walmart overall. I found that certain, if not all, ratio analysis can determine if a company would be a good investment or not.
