Walmart Inc

Walmart's business shows the traits Buffett valued, but at this price our tests find no margin of safety.

Walmart runs stores, clubs and eCommerce, and earns its money from a large volume of small margins. Revenue reached $713.2B in fiscal 2026, and our tests found no loss years across the period measured. Return on equity averaged 17% and return on invested capital averaged 15%, with total debt of $44.8B that our calculations put at a payback of 2.9 yrs. Our research status for Walmart is strong business, demanding price: the share price of $118.47 sits far above our base-case value of $31.86, and the owner-earnings yield of 1.6% (cash an owner could take out, as a share of the price) is well below the 5.1% ten-year Treasury yield.

Walmart sells everyday groceries, general merchandise and health products to households through stores, clubs and eCommerce, earning a small margin on each sale. Revenue reached $713.2B and operating margin averaged 4.2% over the period measured. Paid memberships at Sam's Club and Walmart+, plus advertising, marketplace and fulfilment services, add income on top of the retail base.

• Comparable store, club and eCommerce sales growth across three segments
• Membership fees from Sam's Club and Walmart+
• Advertising, marketplace and fulfilment services
• Price leadership, supported by cost control and volume buying
• Store and club footprint used for pickup and delivery

Inside the circle? Operating margin has moved in a narrow band, 0.4% around its average, and the period shows no loss years, which fits a circle-of-competence test. Against that, owner earnings have grown slowly at 1.6% a year, and the filing describes a competitive, fast-changing market where digital rivals and AI tools could shift share and costs. The excerpts do not include the income statement or balance sheet, so the profit and debt tokens rest on our calculations rather than on the text quoted here.

Walmart's clearest protection is cost. The filing ties its everyday low price model to an everyday low cost commitment, and says cost savings are passed along to customers, which only works at large scale. Membership fees at Sam's Club and Walmart+, and the advertising and marketplace services the filing describes, add income that does not depend only on the margin on each sale. Operating margin averaged 4.2% with little variation, and return on invested capital averaged 15%, which fits a narrow moat. Two cautions apply: the filing's own return on investment is lower than our 17%, and the prior-year operating margin in its table differs from our ten-year series, so we cannot check the trend from these excerpts alone.

Management returns cash to owners through dividends and buybacks, and the filing describes both. Repurchases in fiscal 2026 were made at an average price far above our base-case value of $31.86 per share, against a share price of $118.47. Buffett's test is that buybacks make sense only below intrinsic value, so this counts against the record. Capital spending has risen faster than depreciation, and the filing reports that return on investment fell in the latest year, yet it also says returns will improve over time. Owner earnings have grown only 1.6% a year, so the extra reinvestment has not yet shown up as cash an owner could take out. The excerpts do not include the full cash flow statement or the share count table, so the share count trend rests on our calculation.

• The diluted share count has changed by -1.7% a year, so buybacks have reduced the number of shares owners hold.
• Repurchases in fiscal 2026 were made at an average price well above our base-case value of $31.86 per share, which fails the test that buybacks make sense only below intrinsic value.
• Return on invested capital was 17% in the latest year, against an average of 15%, and the filing links the fall in return on investment to higher spending on property and equipment.
• Dividends are a steady use of cash, with payout averaging 49% of profit over the period measured.

• FailsMargin of safetyFails

  At $118.47, the price is above the base-case value of $31.86 (the bear case is $16.67), so there is no margin of safety (-272%). The standard lens asks for 25%.

  Why this test
• FailsInterest rates are gravityFails

  The owner-earnings yield is 1.6% against a 10-year Treasury yield of 5.1%.

  Why this test

Buffett's tests favour this business on most counts. Consistent earning power, high return on equity, high return on capital, low debt and low capital needs all pass in our tests. Owner earnings reached $15.5B on a normalised basis, and free cash flow has averaged 130% of reported profit. The retained earnings test also passes, with $70.1B retained across the period. Two principles fail. Buffett buys only well below a conservative value, and the price is far above our base case, giving a margin of safety of -272%. The principle that interest rates act like gravity also fails: a yield of 1.6% against a Treasury yield of 5.1% means future cash is worth much less today. The moat is narrow. The filing describes cost advantage through its everyday low cost commitment, and membership and advertising income add to the base. The excerpts do not show pricing power tested in a downturn, and Buffett's first question is whether prices can rise without losing customers.

• Return on investment and the capital expenditure range for fiscal 2027 in the next annual report

  The filing says it believes return on capital will improve over time. Rising spending with falling returns would weaken the case for the business.

• Growth in owner earnings compared with growth in revenue

  Owner earnings have grown slowly over the period. Faster growth would show that extra reinvestment is producing cash an owner could take out.

• Share repurchases and the average price paid

  Buffett's test is that buybacks make sense only below intrinsic value. Repurchases well above our base-case value count against the record.

• Self-insured general liability claims and other operating cost pressures

  The filing cites higher claims expense in fiscal 2026. Recurring cost pressure would reduce the margin that the cost advantage depends on.

• Membership fee and advertising income growth

  These streams add income beyond the margin on each sale. Slowing growth would weaken the moat argument.

Questions the filings couldn't answer

• Does pricing power hold when costs rise? The excerpts show some prices absorbed, but they do not test price rises across a full economic cycle.
• What do the income statement and balance sheet show? They are not in the excerpts, so the profit and debt figures rest on our calculations.
• Does the shift to digital and AI shopping strengthen or weaken the store base? The filing names the risk but gives no measure of store traffic change.