Ratio Analysis: Walmart Inc.
The financial results for the key ratios are as follows:
- Debt-to-equity: 0.73
- Current ratio: 0.76%
- Return on equity: 7.2%
- Quick ratio: 0.21
- Working capital ratio: 0.79
- Price-earnings ratio: 23.25
- Earnings per share: $2.26
(Stock Analysis, 2020; Macro-Trends, 2020)
Walmart is a U.S. multinational retail company operating chains of stores in various categories of retail. It has over 11,000 stores and also operates a chain of retail warehouses. The company has been growing rapidly, with over 2% revenue growth in the past three years (Dekimpe, 2020). It is the leading retail company for consumer goods in the U.S. Its financial objective includes the target to enhance its stock prices and meet shareholders’ expectations. The primary concern is the earnings per share that have been on a slight decline trend over the recent years. However, the company has remained solvent for the longest time, and over-valuation is less often.
The debt-to-equity ratio is below 1, which means that the company relies more on equity to fund its operations than debt. Therefore, it utilizes $1 of equity for every $0.73 of debt. The current ratio of 0.76 means that the company’s assets match 76% of its liabilities. It improved from an average of 0.73 in 2018 to 0.76 in 2019. The return on equity of 7.2% means that a net income of $7.2 is earned for each $1 of equity. Therefore, investors profit significantly from their investment in the company. A quick ratio of 0.21 is below the ideal value of 1, which means that it cannot readily settle its liabilities with highly liquid assets. The company has depicted sound financial health regarding its working capital, which increased from 4.3 in 2018 to 5.4 billion U.S. dollars by the close of 2019. However, the current working capital ratio indicates that the company has fewer assets than liabilities, and it should improve to reach a value of above 1. However, the company’s price per earnings ratio has improved from an overvaluation of 55.35 to about 27 in the past year. It means that the share price of $23.25 leads to a $1 earnings for the share. Overall, Walmart has great odds for growth, and its financial future appears to be promising. It has experienced growth and positive gains across most ratios, hence outperforming its retail space competitors (Rahman, 2020). It indicates that the company is generally in good financial health.
References
Dekimpe, M. (2020). Retailing and retailing research in the age of big data analytics. International Journal of Research in Marketing 37. DOI: 10.1016/j.ijresmar.2019.09.001.
Macro-Trends(2020). Walmart Inc. Retrieved from https://www.macrotrends.net/stocks/charts/WMT/walmart/current-ratio.
Rahman, Md. (2020). Financial Analysis Of Costco Wholesale Corporation: Exploring The Strengths And Weaknesses. 41: 17–34.
Stock Analysis (2020). Walmart Inc. Retrieved from https://www.stock-analysis-on.net/NYSE/Company/Walmart-Inc/Ratios/Liquidity.