ONE LEVEL DEEPER
WMT
Warren Buffett frameworkThe Owner-OperatorBenjamin Graham frameworkThe Value ArchitectMichael Mauboussin frameworkThe Expectations EngineerHoward Marks frameworkThe Cycle WhispererPeter Lynch frameworkThe Everyday Edge

At 56x earnings with 0.45% yield versus 4.33% treasuries, this framework finds no margin of safety in retail's fortress.

cautiousLeaning Bearishconviction

Applying this framework reveals a fortress business trading at speculative prices — the margin of safety has inverted.

THE LENSES
THE MARGIN OF SAFETYabsent

Does the price protect me from permanent loss of capital?

P/E ratio of 56.03x sits at 93rd percentile over 10 years
DCF fair value of $182.03 vs current price of $125.79 suggests 30.9% discount
EV/EBITDA of 96.55x at 90th percentile historically
Market implies 5.43% perpetual growth vs 4.7% trailing revenue growth

This framework sees conflicting signals — DCF models suggest undervaluation while multiples scream overvaluation. At 56x earnings, even modest disappointment could trigger substantial capital loss. The traditional margin of safety has vanished into premium territory.

P/E Ratio
EARNINGS YIELD VS BONDSdangerous

Do stocks offer a meaningful premium over bonds to justify equity risk?

Earnings yield of 0.45% vs treasury yield of 4.33%
Negative spread of -3.88% — worst in company history
Earnings yield at 13th percentile over 10 years
4.7% revenue growth insufficient to close yield gap quickly

Applying this lens reveals extreme vulnerability — investors accept 0.45% earnings yield while treasuries offer 4.33% risk-free. This framework suggests waiting for Mr. Market to offer better terms. The arithmetic offers no protection.

Earnings Yield
BALANCE SHEET FORTRESSadequate

Can this company survive a prolonged downturn?

Current ratio of 0.79x indicates tight liquidity position
Total debt of $67.1 billion against $284.7 billion in assets
Interest coverage of 12.23x provides adequate debt service ability
Operating cash flow of $41.6 billion annually covers obligations

This framework sees adequate but not fortress-like strength. The sub-1.0 current ratio raises concerns about near-term liquidity, though massive operating cash flow provides cushion. Debt levels are manageable but not minimal.

Current Ratio
THE EARNINGS RECORDproven

Has management demonstrated consistent earnings over 7-10 years?

Revenue grew from $115.9B in Q4'16 to $190.7B in Q1'26
Operating income expanded from $2.7B to $8.7B over same period
Beat earnings estimates 94.4% of the time across 36 quarters
Free cash flow volatility with -2,540% decline in Q2'22

Applying this framework finds exceptional consistency in operations with concerning cash flow volatility. The 94.4% beat rate demonstrates predictable earnings, though the extreme FCF swings in 2022 reveal underlying fragility during stress periods.

Operating Income
KEY NUMBERS
VERDICT

This framework suggests extreme caution at current prices. While Walmart demonstrates operational excellence with consistent earnings growth and adequate financial strength, the 56x earnings multiple eliminates any margin of safety. The 0.45% earnings yield versus 4.33% treasury rates violates Graham's fundamental requirement for equity risk premium. Would Graham pay 56x earnings for 4.7% growth when treasuries yield nearly 10x more?

This analysis applies Benjamin Graham's published investment framework to publicly available financial data. It is not authored by, endorsed by, or affiliated with Benjamin Graham. Educational purposes only. Not financial advice.

OTHER PERSPECTIVES
Warren Buffett framework
The Owner-Operator
Leaning Bullish
Michael Mauboussin framework
The Expectations Engineer
Neutral
Peter Lynch framework
The Everyday Edge
Leaning Bearish
Howard Marks framework
The Cycle Whisperer
Bearish
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