Walmart Financial Report and Financial Analysis: 2016 to 2020
Walmart Inc. Financial Report and Financial Analysis started with an in-depth review of Walmart's 10k Annual report, specifically, Walmart's income statement and balance sheet.
Next Paul Borosky, MBA., summarized their financial information and input it into a proprietary financial model, which shows their income statement and balance sheet trends as well as calculations for Walmart's financial ratios, and financial ratio trends covering 5 years.
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Walmart stock price started April of 2019 at $98.80. It ended April of 2020 with a stock price of $118.22. This is a growth rate annually of 19.66%. From an investor’s perspective, this growth rate well exceeds most other competitors in its industry.
Walmart has been consistently paying dividends over the last five years. Further, their dividend payments have been growing continuously as well. However, the actual growth rate for dividends has been declining. In 2017, the growth rate for dividends was 2%. However, in 2019, this growth rate slowed to 1.92%. Investors should expect this growth rate declined to continue for your seeable future.
Walmart Inc. Income Statement Summary
Cost of Goods Sold
Walmart’s cost of goods sold in the last five years has ranged between 73.7% and 75.3%. This narrow range shows that Walmart has optimized a business model that allows the firm to keep its prices low. When price increases do happen, it seems like the company has no problem with passing on the price elevation to loyal consumers.
Research and Development
In the last five years, Walmart has not spent any money on research and development. Just because a company is in retail does not mean they cannot innovate. Just look at Amazon’s Whole Foods. A huge failing on the part of the executives.
Walmart Summary Income Statement 2020
|R & D|
Walmart Balance Sheet Summary
Walmart’s Accounts Payable ended 2016 at $38 billion. There Accounts Payable climbed to $46.9 billion in 2020. This indicates that the company may be paying their suppliers slower over time. This process does help the organization by increasing their working capital. However, by holding back on paying suppliers, it may impact their supply chain loyalty. This may lead to vendor turnover, which results in additional labor costs because of the need to seek out replacements. A better strategy would be to set a parameter for when its vendor should expected to receive funds. And then stick to it.
Long Term Debt
Walmart ended 2016 with long-term debt at approximately $44 billion. Their long-term debt would then climb to $50 billion in 2019. In 2020 though, their long-term debt fell to $43.7 billion. Because interest rates are at historic lows, the organization should probably be taking on more debt for the next couple years. Not only will this insure the firm has enough liquid assets to whether recessions but it may help with funding possible acquisitions in the marketplace.
Walmart Summary Balance Sheet 2020
|Short Term Investment||-||-||-||-|
|LT Debt - Current||511||729||667||2,256||2,745|
|Total Current Liabilities||77,790||77,477||78,521||66,928||64,619|
|Total Equity & Liability||236,495||219,295||204,522||198,825||199,581|
Walmart Financial Ratio Summary and Analysis
Walmart’s cash ratio ended 2016 at .13. In the next five years, this ratio would range between .09 and .12. This shows that Walmart has a specific strategy that they’re utilizing for cash holdings. Such a small cash holding, as compared to revenues and costs, runs the risk of short-term liquidity problems. However, because the firm does receive a substantial amount of cash on a daily basis from sales, this may be a worthwhile calculated bet.
Days Sales Outstanding
The company’s days sales outstanding has ranged between 4.05 and 4.38. From an investor’s perspective, since this is the retail industry, days sales outstanding is of very little concern.
Net Profit Margin
Walmart’s net profit margin ended 2016 at 3.13%. This ratio fell to 1.3% in 2019, only to rebound to 2.9% in 2020. Slim profit margins over an extended period of time show that the firm embraces and continuously practices low-cost leadership pricing strategies. In order to maintain this type of strategy though, the organization needs to ensure prompt payment to its suppliers. If the organization continually turns over suppliers, then operational costs will inevitably increase. As shown in the profit margin, the company has very little room for error.
Walmart 2020 Liquidity Ratios
|Net Working Capital||(9,365)||(11,373)|
Walmart 2020 Asset Utilization
|Total Asset Turnover||2.22||2.35|
|Fixed Asset Turnover||4.98||4.93|
|Days Sales Outstanding||4.38||4.46|
|Accounts Receivable Turnover||83.38||81.87|
|Working Capital Turnover||(55.95)||(45.23)|
|Average Days Inventory||0.03||0.03|
|Average Days Payable||0.03||0.03|
Walmart 2020 Profitability Ratios
|Return on Assets||6.43%||3.04%|
|Return on Equity||18.64%||8.38%|
|Net Profit Margin||2.90%||1.30%|
|Gross Profit Margin||24.69%||25.10%|
|Operating Profit Margin||3.93%||4.27%|
|Basic Earning Power||8.70%||10.01%|
Walmart 2020 Long-term Debt
|Times Interest Earned||8.53||10.31|