Business 570 AVE Managerial Finance ( Financial Ratio Analysis 2 (Walmart)
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FinancialRatioAnalysis6.docx1
Financial Ratio Analysis
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This paper compares Walmart Inc. with Target Corporation and Costco Wholesale Corporation using financial ratios. It also compares Walmart with itself across fiscal years 2026, 2025, and 2024. Target and Costco are appropriate peers because all three firms operate at scale in U.S. retail, although Costco’s warehouse membership model makes its margin structure different from Walmart and Target (Walmart Inc., 2026).
Walmart’s financial ratios (Walmart Inc., 2025; Yahoo Finance, 2026 and Walmart Inc., 2026)
Profitability Ratios
|
Ratio |
2026 |
2025 |
2024 |
|
Gross margin |
24.21% |
24.13% |
23.73% |
|
Operating margin |
4.22% |
4.35% |
4.20% |
|
Net margin |
3.10% |
2.88% |
2.41% |
Liquidity Ratios
|
Ratio |
2026 |
2025 |
2024 |
|
Current ratio |
0.79 |
0.82 |
0.83 |
|
Quick ratio |
0.20 |
0.20 |
0.20 |
Working Capital Ratios
|
Ratio |
2026 |
2025 |
2024 |
|
Inventory turnover |
9.29x |
9.19x |
8.79x |
Significance of A/R turnover & A/P turnover is meaningful in this industry
Accounts receivable turnover is important in retail since the majority of sales are made in a short period using cash and cards, and the cash is converted. Turnover of accounts payable is important since inventory financing is made with the aid of supplier credit. When combined, these ratios indicate the efficiency of a retailer when it comes to collections, supplier payments, liquidity, and working capital in its day-to-day activities.
Interest Coverage Ratios
|
Ratio |
2026 |
2025 |
2024 |
|
EBIT/Interest |
12.27x |
13.07x |
12.64x |
|
EBITDA/Interest |
18.11x |
18.85x |
18.19x |
Explanation on why EBITDA/Interest is more meaningful than EBIT/Interest
EBITDA/Interest is more important since it reinstates depreciation and amortization which are non-cash expenses. In retail, businesses spend much money in stores, equipment, and distribution centers. Subsequently, EBITDA provides a better understanding of cash available to meet interest payments as compared to EBIT.
Leverage Ratios
|
Ratio |
2026 |
2025 |
2024 |
|
Debt / Equity |
0.45x |
0.43x |
0.48x |
|
Debt / Capital |
31.0% |
30.0% |
32.5% |
|
Debt / Enterprise Value |
4.45% |
4.63% |
8.15% |
Discussion of the meanings of each, and the most important ratio.
Debt/Equity is how much financial leverage of a company based on its use of debt as compared to the amount of shareholder equity. Debt/Capital measures the ratio of debt to the total long-term capital which shows the extent to which the company is permanently financed by borrowing. Debt to Enterprise Value is a ratio of debt to the total market value of the company (debt and equity). Out of the three, Debt to Enterprise Value is the most significant as it is based on current market value as opposed to book values only. This provides a wider and more realistic perspective of financial risk and the capability of the company to finance its debt.
Valuation Ratios
|
Ratio |
2026 |
2025 |
2024 |
|
P/E |
43.64x |
40.73x |
28.84x |
|
Price / Book |
9.53x |
8.69x |
5.29x |
|
Enterprise Value / EBIT |
33.74x |
28.74x |
18.37x |
The profitability of Walmart improved during the three years with a particular increase in net margin. The inventory turnover was also increased, and liquidity was tight but stable as it is typical of large retail companies. The leverage remained moderate throughout the period (Walmart Inc., 2026).
Comparison between Walmart, Target, and Costco financial ratios (Walmart Inc., 2026; Target Corporation, 2026; and Costco Wholesale Corporation, 2025)
|
Ratio |
Walmart |
Target |
Costco |
|
Gross margin |
24.21% |
27.93% |
12.84% |
|
Operating margin |
4.22% |
4.88% |
3.77% |
|
Net margin |
3.10% |
3.54% |
2.94% |
|
Current ratio |
0.79 |
0.94 |
1.03 |
|
Quick ratio |
0.20 |
0.36 |
0.55 |
|
Inventory turnover |
9.29x |
6.03x |
13.05x |
|
EBIT/Interest |
12.27x |
11.50x |
67.42x |
|
EBITDA/Interest |
18.11x |
18.54x |
83.18x |
|
Debt/Equity |
0.45 |
1.02 |
0.20 |
|
Debt/Capital |
31.00% |
50.45% |
16.60% |
|
Trailing P/E |
45.01x |
14.74x |
51.16x |
|
Price/Book |
9.83x |
3.36x |
13.60x |
|
Enterprise Value/EBIT |
34.87x |
13.50x |
41.07x |
|
Debt/Enterprise Value |
4.30% |
23.83% |
1.36% |
Walmart is in the middle between Target and Costco in most measures. Target has higher margins, the Costco has the highest inventory turnover, and the lowest leverage, and Walmart has the most balanced overall profile in terms of profitability, efficiency, and leverage (Walmart Inc., 2025; Yahoo Finance, 2026 and Walmart Inc., 2026).
References
Costco Wholesale Corporation. (2025). Annual report for the fiscal year ended August 31, 2025. U.S. Securities and Exchange Commission. Retrieved from: https://www.sec.gov/Archives/edgar/data/909832/000090983225000101/cost-20250831.htm
Target Corporation. (2026). Target Corporation reports fourth quarter and full-year 2025 earnings. Retrieved from: https://corporate.target.com/press/release/2026/03/target-corporation-reports-fourth-quarter-and-full-year-2025-earnings
Walmart Inc. (2025). Annual report for the fiscal year ended January 31, 2025. U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/104169/000010416925000021/wmt-20250131.htm
Walmart Inc. (2026). Balance sheet. Walmart Investor Relations. Accessed from: https://stock.walmart.com/financial-information/balance-sheet
Walmart Inc. (2026). Income statement. Walmart Investor Relations. Accessed from: https://stock.walmart.com/financial-information/income-statement
Yahoo Finance. (2026). Costco Wholesale Corporation valuation measures and financial statistics. Accessed from: https://finance.yahoo.com/quote/COST/key-statistics
Yahoo Finance. (2026). Target Corporation valuation measures and financial statistics. Accessed from: https://finance.yahoo.com/quote/TGT/key-statistics
Yahoo Finance. (2026). Walmart Inc. valuation measures and financial statistics. Accessed from: https://finance.yahoo.com/quote/WMT/key-statistics
