WMT

Financial health: Fair5.5/10

5 strengths, 4 concerns. Weakest points: current ratio, net margin, earnings growth and 1 more.

• Debt to equity: 0.38 (Strong, benchmark < 0.5) — Debt of 0.38x equity is conservative against the 0.5x benchmark. It has improved over the last 4 years.
• Net debt vs cash flow: 1.8y (Strong, benchmark < 4 years) — Net debt of $27.4B is 1.8x annual free cash flow — about 2 years of cash flow to repay.
• Current ratio: 0.79 (Concern, benchmark > 1.5) — Short-term assets cover only 0.79x short-term liabilities — below 1.0, meaning bills due this year exceed the assets on hand to pay them. It has been broadly flat over the last 4 years.
• Return on equity: 22.3% (Strong, benchmark > 15%) — Earns 22.3% on shareholder equity, comfortably past the > 15% mark.
• Gross margin: 24.8% (Watch, benchmark > 40%) — Keeps 24.8% of revenue after the direct cost of sales, short of the > 40% mark.
• Net margin: 3.0% (Concern, benchmark > 10%) — Turns 3.0% of revenue into profit, well short of the > 10% mark.
• Free cash flow: $14.9B (Strong, benchmark positive) — Generated $14.9B of free cash flow after capital spending. It has improved over the last 4 years.
• Revenue growth: 5.9% (Watch, benchmark > 10%) — Revenue changed 5.9% year on year, short of the > 10% mark.
• Earnings growth: -9.1% (Concern, benchmark > 10%) — Earnings changed -9.1% year on year, well short of the > 10% mark.
• PEG ratio: 4.22 (Concern, benchmark < 1) — At 4.22, the price looks expensive relative to expected growth — Lynch treated 1.0 as fair value.
• Payout ratio: 35.0% (Strong, benchmark < 60%) — Pays out 35.0% of earnings as dividends, leaving room to keep paying.