Current Price: ~ $61/share
Projected Yield: ~ 2.60%
WalMart is the largest retailer in the world with more than $400 billion in annual revenue and fast approaching 10,000 stores across the globe. The company mainly operates supercenters, followed by wholesale warehouse clubs and also is testing a smaller store format for urban areas, which the company has yet to penetrate.
Estimated WACC for the firm today is 6.09% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year

FCF
$Millions

2003

3177

2004

5688

2005

2151

2006

3070

2007

4498

2008

5417

2009

11648

2010

14065

2011

10944

2012

10745

Average Annual Growth FCF: ~ 26%
CAGR FCF: ~ 15%
Consensus Forecast Industry 5Year Growth: ~ 14% per year
Consensus Forecast Company 5Year Growth: ~ 9% per year
Internal Growth Rate: ~ 6%
Sustainable Growth Rate: ~ 18%
Scenario 1
 Start at $10745 million FCF
 Assume a 5year growth rate in FCF of 9% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future cash flows, discounted at a WACC of 6.09%, give a present value for the entire firm (Debt + Equity) of $278429 million. If the firm's fair value of debt is estimated at $53043 million, then the fair value of the firm's equity could be $225386 million. $225386 million / 3430 million outstanding shares is approximately $66 per share and a 20% margin of safety is $53/share.
Year

FCF
$Millions

0

10745

1

11712

2

12766

3

13915

4

15167

5

16533

Terminal
Value

295841

The firm's future cash flows, discounted at a WACC of 6.09%, give a present value for the entire firm (Debt + Equity) of $278429 million. If the firm's fair value of debt is estimated at $53043 million, then the fair value of the firm's equity could be $225386 million. $225386 million / 3430 million outstanding shares is approximately $66 per share and a 20% margin of safety is $53/share.
Scenario 2
All else being equal,
All else being equal,
 Assume a 5year growth rate in FCF of 9% per year, then 1% growth in FCF per year forever:
Discounted Cash Flow Valuation
Year

FCF
$Millions

0

10745

1

11712

2

12766

3

13915

4

15167

5

16533

Terminal
Value

353949

 Present Value of the entire firm (Debt + Equity): $321664 million
 Value of Equity: $268621 million or $78/share
 20% margin of safety is $62/share
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.