Walmart Inc.

- Discounted Cash Flow Analysis

($ in Millions Except Per Share and Per Unit Data)

DCF Assumptions & Output:

Company Name: Walmart Inc. Terminal Value - Multiples Method: Terminal Value - Perpetuity Growth Method:
Ticker: WMT
Current Share Price: $ 139.43 Median TEV / EBITDA of Comps: 13.0 x Expected Long-Term GDP Growth: 1.50%
Baseline Terminal EBITDA Multiple: 12.3 x Baseline Terminal FCF Growth Rate: 0.00%
Discount Rate (WACC): 4.37%
Effective Tax Rate: 31.7% Baseline Terminal Value: $ 556,979 Baseline Terminal Value: $ 556,979
Last Fiscal Year: 2021-01-31 Implied Terminal FCF Growth Rate: 0.00% Implied Terminal EBITDA Multiple: 12.3 x

Current Equity Value: $ 396,957 (+) PV of Terminal Value: 362,977 (+) PV of Terminal Value: 362,977
(-) Cash & Cash-Equivalents: (17,741) (+) Sum of PV of Free Cash Flows: 175,597 (+) Sum of PV of Free Cash Flows: 175,597
(-) Equity Investments: (14,400) Implied Enterprise Value: 538,574 Implied Enterprise Value: 538,574
(-) Other Non-Core Assets, Net: -
(-) Net Operating Losses: (9,179) % of Implied TEV from Terminal Value: 67.4% % of Implied TEV from Terminal Value: 67.4%
(+) Total Debt & Finance Leases: 48,647
(+) Preferred Stock: - (+) Cash & Cash-Equivalents: 17,741 (+) Cash & Cash-Equivalents: 17,741
(+) Noncontrolling Interests: 6,606 (+) Equity Investments: 14,400 (+) Equity Investments: 14,400
(+) Unfunded Pension Obligations: - (+) Other Non-Core Assets, Net: - (+) Other Non-Core Assets, Net: -
Current Enterprise Value: $ 410,890 (+) Net Operating Losses: 9,179 (+) Net Operating Losses: 9,179
(-) Total Debt & Capital Leases: (48,647) (-) Total Debt: (48,647)
(-) Preferred Stock: - (-) Preferred Stock: -
(-) Noncontrolling Interests: (6,606) (-) Noncontrolling Interests: (6,606)
(-) Unfunded Pension Obligations: - (-) Unfunded Pension Obligations: -
Implied Equity Value: 524,641 Implied Equity Value: 524,641

Diluted Shares Outstanding: 2,847.0 Diluted Shares Outstanding: 2,847.0

Implied Share Price from DCF: $ 184.28 Implied Share Price from DCF: $ 184.28
Premium / (Discount) to Current: 32.2% Premium / (Discount) to Current: 32.2%
 Historical: Projected:
Unlevered Free Cash Flow Projections: Units: FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31

Retail Square Feet: M Sq. Ft. 1,129 1,129 1,121 1,143 1,166 1,184 1,202 1,214 1,226 1,232 1,238 1,244 1,250
Growth Rate: % N/A – (0.7%) 2.0% 2.0% 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.5% 0.5%

Sales per Square Foot: $ / Sq. Ft. 452.02 460.52 495.30 510.16 525.47 538.60 552.07 563.11 574.37 582.99 591.73 597.65 603.62
Growth Rate: % N/A 1.9% 7.6% 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0%

COGS and OpEx per Square Foot: $ / Sq. Ft. 432.57 442.30 475.19 489.44 504.13 516.73 529.65 540.24 551.05 559.31 567.70 573.38 579.11
Growth Rate: % N/A 2.2% 7.4% 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0%

Maintenance CapEx per Square Foot: $ / Sq. Ft. 8.93 9.48 9.09 9.36 9.64 9.89 10.13 10.34 10.54 10.70 10.86 10.97 11.08
Growth Rate: % N/A 6.1% (4.1%) 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0%

D&A per Square Foot: $ / Sq. Ft. 9.46 9.73 9.95 10.20 10.45 10.66 10.87 11.04 11.20 11.31 11.43 11.52 11.61
Growth Rate: % N/A 2.9% 2.2% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0% 0.8% 0.8%

Growth CapEx per New Square Foot: $ / Sq. Ft. 150.00 154.50 159.14 163.11 167.19 170.54 173.95 176.55 179.20 181.00
Growth Rate: % 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0%

Membership & Other Income Growth Rate: % N/A (0.9%) (3.0%) 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0%

Revenue:
(+) Net Sales: $M $ 510,329 $ 519,926 $ 555,233 $ 583,328 $ 612,844 $ 637,588 $ 663,330 $ 683,363 $ 704,001 $ 718,133 $ 732,550 $ 743,575 $ 754,766
(+) Membership & Other Income: $M 4,076 4,038 3,918 4,036 4,157 4,261 4,367 4,454 4,543 4,612 4,681 4,728 4,775
Total Revenue: $M 514,405 523,964 559,151 587,363 617,001 641,848 667,697 687,817 708,544 722,745 737,231 748,302 759,540
Revenue Growth: % N/A 1.9% 6.7% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.5% 1.5%

Operating Income (EBIT): $M 21,957 20,568 22,548 23,689 24,888 25,892 26,938 27,751 28,589 29,163 29,749 30,197 30,651
Operating (EBIT) Margin: % 4.3% 3.9% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%

(-) Taxes, Excluding Effect of Interest: $M (6,963) (6,523) (7,151) (7,512) (7,893) (8,211) (8,543) (8,801) (9,067) (9,249) (9,434) (9,576) (9,720)

Net Operating Profit After Tax (NOPAT): $M 14,994 14,045 15,397 16,176 16,995 17,681 18,395 18,951 19,523 19,915 20,315 20,620 20,931

Adjustments for Non-Cash Charges:

(+) Depreciation & Amortization: $M 10,678 10,987 11,152 11,659 12,190 12,620 13,066 13,394 13,731 13,938 14,148 14,332 14,519
% Revenue: % 2.1% 2.1% 2.0% 2.0% 2.0% 2.0% 2.0% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9%

(+/-) Deferred Taxes: $M (812) 425 1,993 563 552 534 513 484 453 462 472 479 486
% Book Taxes: % (11.7%) 6.5% 27.9% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0%

(+/-) Other Operating Activities: $M 1,734 1,981 1,521 1,933 2,030 2,112 2,197 2,263 2,332 2,378 2,426 2,462 2,499
% Revenue: % 0.3% 0.4% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%

(+/-) Change in Working Capital: $M 295 (327) 7,972 2,821 2,816 2,236 2,197 1,610 1,554 1,065 1,086 830 843
% Change in Revenue: % N/A (3.4%) 22.7% 10.0% 9.5% 9.0% 8.5% 8.0% 7.5% 7.5% 7.5% 7.5% 7.5%

(-) Capital Expenditures: $M (10,344) (10,705) (10,264) (13,860) (14,561) (14,314) (14,892) (14,428) (14,863) (14,182) (14,466) (14,690) (14,911)
% Revenue: % 2.0% 2.0% 1.8% 2.4% 2.4% 2.2% 2.2% 2.1% 2.1% 2.0% 2.0% 2.0% 2.0%

Annual Unlevered Free Cash Flow: $M 16,545 16,406 27,771 19,293 20,022 20,870 21,476 22,274 22,730 23,577 23,980 24,034 24,367
Growth Rate: % N/A (0.8%) 69.3% (30.5%) 3.8% 4.2% 2.9% 3.7% 2.0% 3.7% 1.7% 0.2% 1.4%

Period: # 1 2 3 4 5 6 7 8 9 10
PV of Unlevered FCF: $M 18,485 18,379 18,354 18,095 17,981 17,580 17,471 17,025 16,348 15,880

EBITDA: $M $ 32,635 $ 31,555 $ 33,700 $ 35,348 $ 37,078 $ 38,513 $ 40,004 $ 41,146 $ 42,321 $ 43,101 $ 43,896 $ 44,529 $ 45,170
Growth Rate: % N/A (3.3%) 6.8% 4.9% 4.9% 3.9% 3.9% 2.9% 2.9% 1.8% 1.8% 1.4% 1.4%
Sensitivity Tables:

Sensitivity - Terminal FCF Growth Rate vs. Discount Rate and Implied Share Price from DCF Analysis:

Terminal FCF Growth Rate:

18427.8% (1.25%) (1.00%) (0.75%) (0.50%) (0.25%) 0.00% 0.25% 0.50% 0.75% 1.00% 1.25%
5.40%
5.15%
4.90%
4.65%
Discount Rate (WACC): 4.40%
4.15%
3.90%
3.65%
3.40%

Sensitivity - Terminal EBITDA Multiple vs. Discount Rate and Implied Share Price from DCF Analysis:

Terminal EBITDA Multiple:

18427.8% 9.5 x 10.3 x 11.1 x 11.9 x 12.7 x 13.5 x 14.3 x 15.1 x 15.9 x 16.7 x 17.5 x
5.40%
5.15%
4.90%
4.65%
Discount Rate (WACC): 4.40%
4.15%
3.90%
3.65%
3.40%
WACC Analysis - Walmart Inc.
($ in Millions Except Per Share and Per Unit Data)

Discount Rate Calculations - Assumptions:

Risk-Free Rate: 1.70%
Equity Risk Premium: 4.72%
Pre-Tax Cost of Debt: 3.79%
Cost of Preferred Stock: –

Comparable Companies - Unlevered Beta Calculation:

Levered Preferred Equity Unlevered
Name Ticker Beta Debt % Debt Stock % Preferred Value % Equity Tax Rate Beta
Costco Wholesale Corporation COST 0.65 $ 7,617 4.6% $ - – $ 159,718 95.4% 24.4% 0.63
Walgreens Boots Alliance, Inc. WBA 0.48 17,248 26.0% - – 49,098 74.0% 29.0% 0.38
The Kroger Co. KR 0.36 13,413 32.7% - – 27,621 67.3% 23.7% 0.26
Target Corporation TGT 1.01 12,680 11.0% - – 102,391 89.0% 21.2% 0.92
Best Buy Co., Inc. BBY 1.58 1,377 4.5% - – 29,503 95.5% 24.4% 1.53

Median: 0.65 $ 12,680 11.0% $ - – $ 49,098 89.0% 24.4% 0.63

Walmart Inc. WMT 0.48

Walmart Inc. - Levered Beta & WACC Calculation:

Unlevered Preferred Equity Levered
Ticker Beta Debt % Debt Stock % Preferred Value % Equity Tax Rate Beta
Current Capital Structure: WMT 0.63 $ 48,647 10.9% $ - – $ 396,957 89.1% 31.7% 0.68
"Optimal" Capital Structure: WMT 0.63 49,102 11.0% - – 396,502 89.0% 31.7% 0.68

Cost of Equity Based on Comparables, Current Capital Structure: 4.91%

Cost of Equity Based on Comparables, "Optimal" Capital Structure: 4.91%
Cost of Equity Based on Historical Beta: 3.96%

WACC = Cost of Equity * % Equity + Cost of Debt * % Debt * (1 - Tax Rate) + Cost of Preferred Stock * % Preferred Stock

WACC, Current Capital Structure: 4.66%

WACC, Current Capital Structure and Historical Cost of Equity: 3.81%
WACC, "Optimal" Capital Structure: 4.65%

Average WACC Produced by All Methods: 4.37%