Walmart (WMT) recently announced its fiscal third-quarter results, showcasing robust revenue and earnings that surpassed analysts’ expectations. As the retail giant gears up for the crucial Black Friday and Cyber Monday shopping events, understanding its financial standing and investment potential becomes increasingly relevant. This article delves into Walmart’s current worth, investment returns over various periods, and compares it to broader market trends, offering insights for potential investors.
The company reported a revenue of $169.59 billion, exceeding the anticipated $167.72 billion. Furthermore, the adjusted earnings per share (EPS) stood at 58 cents, outperforming the projected 53 cents. This strong performance suggests that Walmart is successfully navigating the current economic landscape and effectively catering to consumer demand.
Walmart’s optimistic outlook for the holiday season is fueled by increased customer purchases of general merchandise, in addition to groceries. The company also noted significant growth in in-store volumes, store pickups, and delivery services.
“In the U.S., in-store volumes grew, pickup from store grew faster, and delivery from store grew even faster than that,” Doug McMillon, Walmart president and CEO, said. Walmart now anticipates net sales growth between 4.8% and 5.1% for the full year, an increase from the previously forecasted range of 3.75% to 4.75%. This upward revision reflects the company’s confidence in its continued growth trajectory.
The retailer’s share price has seen a substantial increase of nearly 60% since the beginning of the year, as of market close on Nov. 18.
Doug McMillon, Walmart president and CEO
Calculating the Value of a Walmart Investment
Walmart stands as the largest retailer in the U.S. based on sales volume. In 2023, the company generated over $635 billion in global retail sales. This impressive figure underscores Walmart’s dominant position in the retail sector.
Walmart’s initial public offering (IPO) took place in October 1970, with shares priced at $16.50 each. The company’s stock began trading on the New York Stock Exchange (NYSE) on August 25, 1972. Since then, Walmart’s shares have undergone 11 two-for-one stock splits, and the company has consistently paid quarterly dividends to investors since 1973.
Walmart’s share price has experienced remarkable growth over the past five decades. As of market close on Nov. 18, the company’s stocks were priced at $84.08 per share.
Here’s a breakdown of how a hypothetical $1,000 investment in Walmart would have performed over different timeframes:
Investment Performance Over Time
- One Year Ago:
- Percentage change: 64%
- Total as of Nov. 18: $1,639
- Five Years Ago:
- Percentage change: 119%
- Total as of Nov. 18: $2,191
- Ten Years Ago:
- Percentage change: 227%
- Total as of Nov. 18: $3,266
- At IPO (October 1970):
- Percentage change: 1,788,465%
- Total as of Nov. 18: $17,885,648
These figures highlight the significant long-term growth potential of Walmart’s stock. However, past performance is not indicative of future results, and various factors can influence stock prices.
The Case for Passive Investing
While Walmart’s stock has demonstrated strong returns, financial experts often advocate for a passive investing strategy. This approach involves investing in low-cost index funds that track a broad market index, such as the S&P 500.
The benefits of passive investing include:
- Diversification: Index funds provide exposure to a wide range of companies, reducing the risk associated with investing in a single stock. For example, investing in an S&P 500 index fund provides exposure to the top 500 publicly traded U.S. companies, including Walmart, Amazon, and Apple.
- Lower Costs: Index funds typically have lower expense ratios compared to actively managed funds, as they simply aim to replicate a market index.
The S&P 500 has also shown substantial growth over the past decade.
As of Nov. 18, the S&P 500 grew by about 31% compared with 12 months ago. The index has soared by nearly 89% since 2019, and ballooned by about 187% since 2014.
Conclusion: Weighing Investment Options
Walmart’s financial performance and historical stock growth demonstrate its value as a prominent player in the retail industry. While investing in individual stocks like Walmart can offer significant returns, it’s crucial to consider the risks involved and diversify your investment portfolio. A passive investing strategy, utilizing low-cost index funds, can provide broad market exposure and potentially mitigate risk. Ultimately, the best investment approach depends on individual financial goals, risk tolerance, and investment horizon.
