Our Analysis of Walmart Inc. (WMT)

Every Tuesday at HX Daily, we analyze one of the US stock market's biggest and most widely owned companies.

We analyze these companies using our “Quantamental” approach.

This is an analysis process that we have developed over the last three decades and is a quick way to analyze the stock's potential.

As a quick reminder, our "Quantamental" analysis is not a formal stock recommendation but rather a quick analytical analysis tool to give an initial view of the stock in the short and intermediate term.

Since starting this analysis process in July, we have analyzed several of the largest companies in the S&P 500.

Today, we analyze another of the top ten market capitalization stocks in the S&P 500. The company is retailer Walmart Inc. (NYSE: WMT).

We are sure you are familiar with the company and will be surprised if you have yet to shop there.

The company was founded in 1945 by a former J.C. Penney employee named Sam Walton when he bought a Ben Franklin variety store, a franchise of the Butler Brothers chain. His goal was to sell products at very low prices and create scale by volume off the back of this value proposition for the consumer.

Walton opened the first Wal-Mart Discount City store in Rogers, Arkansas, in 1962. Since then, the company has grown to be the largest private employer in the world, with more than 2.1 million employees and a total revenue of nearly $700 billion. This makes it the largest company in the S&P 500 by revenue.

Here is the analysis…

1. Technical Analysis

Walmart went public way back in 1970 and has been one of the greatest stock market stories of all time. The company began trading on the New York Stock Exchange on my birthday (August 25) in 1972!

Here is the chart of the stock over the last decade…

The stock has gone from a low of below $20 per share to a recent high of over $90 per share. This is a roughly four-fold increase

and a strong return, but it is not much greater than the performance of the S&P 500 over the same period. The stock underperformed the S&P 500 until the start of 2024 when it took off higher.

This becomes evident when you look at the chart over the last year. Here is that chart along with the relative strength index or "RSI” …

In the last year, the stock has essentially gone straight up.

We don’t have the moving averages on this chart, but it has only breached the 50-day moving average two times. It has not touched the 100-day or 200-day moving averages even once. This is amazing for a stock this big.

Off the back of their most recent earnings report, the stock has spiked even higher. This has pushed the RSI to levels it has rarely seen in the last decade.

It has only traded above this level of RSI eleven times over that period.

Here is a table showing how the stock has performed in the weeks and months after going through this level of RSI.

Like many of its large capitalization traditional company peers, the stock does not trade well after achieving this level of overbought.

We saw this earlier this year when we wrote up Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK/B). At that time, the stock was trading with an RSI above 81, and we felt it was unlikely to go much higher in the next few months. The stock only just recently went higher than where it was when we wrote our report.

We think something similar is likely to happen here with WMT.

It's clearly in a well-established uptrend with good momentum. However, we think buying the stock at these levels is a poor bet and would not buy the stock today based on the technical analysis.

TECHNICAL ANALYSIS = AVOID

2. Earnings Revisions

Our readers know that we think the most vital driver of near-term stock price performance is whether companies beat numbers and see positive earnings revisions.

We refer to them as “earnings” revisions, but they can also be revenue revisions. We usually look at not only the most popular measure - earnings Per Share (EPS)but also other measures, such as Earnings Before Interest, Depreciation, and Amortization (EBITDA).

Like most well-established companies, the EPS numbers are the most widely followed at WMT.

Here is a chart of the stock price versus the fiscal year 2025 EPS estimates for the company…

The green line represents the earnings estimates, and you can see that WMT has seen decent positive revisions over the last eighteen months.

Like many of the largest companies, the movement in the numbers is not that large. EPS estimates have moved from $2.50 to $2.75 or up about +10% over the period. There also has been some volatility in the numbers.

We think this is a solid track record of positive earnings revisions. The movement is not that great compared to some of the companies we have analyzed recently – like NVIDIA Corporation (NASDAQ: NVDA) and Broadcom Inc. (NASDAQ: AVGO).

We reference this from the perspective of the big move in the stock. We are surprised it has moved as much as it has off the back of this level of earnings revisions.

However, the company has a strong record of beating analysts' estimates over the last half-decade. Here is that data…

Overall, the company has a solid track record of numbers going higher and beating numbers. This has powered the stock higher.

While we think the move in the stock is rather large relative to the movement in earnings estimates, we believe the momentum likely continues. On this basis, the stock remains a buy.

EARNINGS REVISIONS = BUY

3. Earnings Growth

The final measure we focus on is the actual growth in earnings.

While earnings revisions drive a stock higher in the short term, earnings GROWTH drives a stock higher in the long term.

In our INVESTING strategies, we are looking for companies that will grow EPS from $1 to $10. If you can find those kinds of stocks, you can make a LOT of money.

Here is the table for the EPS results of WMT over the last ten years…

Amongst the largest market capitalization companies in the S&P 500, this is one of the more interesting earnings growth track records, and not necessarily in a good way.

Most of those other companies have seen MUCH greater earnings growth, and it has been much more consistent. Over this period, EPS are up 50%.

NVDA has seen that kind of aggregate earnings growth in a single quarter in recent periods!

There is nothing wrong with this; in the last couple of years, the company has seen an acceleration in earnings growth.

What it does mean, though, is that, unlike its mega-capitalization peers, the stock has seen a significant expansion in the earnings multiple.

We rarely discuss the "v" word (valuation) at HX Research because we think it seldom governs the near-term price movement in stocks. Sometimes, though, it becomes so extended that it does play a role.

The current price-to-earnings ratio on WMT is roughly 35x 2025 earnings per share. This is higher than all the other members of the top 10 largest companies other than NVDA and Tesla Inc. (NASDAQ: TSLA).

There is nothing wrong with that, but we think it is a genuine concern for the future returns for the shares.

However, the stock remains a buy based on the current earnings growth and momentum. It's just not a buy we would be very enthused about putting money into today.

EARNINGS GROWTH – BUY

Conclusion

WMT was the last one of the top 10 largest market capitalization stocks in the S&P 500 for us to analyze using our “Quantamental” approach.

We have followed the company for many decades, but the result of our analysis surprised us.

The stock is at an overbought level that it has seldom seen in the last ten years. It also trades at one of the highest valuations amongst the largest companies while having the slowest earnings growth.

Recent earnings momentum has been strong, but of all the stocks we have examined in the Top 10 largest, it would rank near the bottom of the list right now.

We would AVOID the shares of WMT right now.