Walmart Inc. (NYSE:WMT)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes showed a decline from 18,200 million US$ in early 2020 to a low of 13,880 million US$ in early 2023. Subsequently, it rebounded substantially to 22,003 million US$ by early 2025. This indicates a recovery phase with a strong upward trend in profitability in the later years after a period of contraction.

Cost of Capital

The cost of capital exhibited a steady increase over the examined period, rising from 8.9% in early 2020 to 9.76% in early 2025. This gradual upward trend suggests increasing financing costs or market risks associated with the invested capital over time.

Invested Capital

The invested capital decreased progressively from 167,329 million US$ in early 2020 to 149,558 million US$ in early 2023. However, a recovery trend emerged thereafter, with invested capital increasing to 161,279 million US$ by early 2025. This reflects an initial reduction in capital deployment followed by renewed capital investment in recent years.

Economic Profit

Economic profit demonstrated notable volatility. Initial positive values declined sharply from 3,301 million US$ in early 2020 to a negative economic profit of -126 million US$ in early 2023, indicating that returns fell below the cost of capital during that period. In the subsequent years, economic profit recovered strongly to 6,255 million US$ by early 2025, surpassing prior levels and reflecting improved value creation beyond the cost of capital.

Overall Analysis

The company's operating profitability faced significant pressure from 2020 to 2023, accompanied by a decline in invested capital. The rising cost of capital throughout the period presented increasing financial challenges. Nonetheless, the strong recovery in both NOPAT and economic profit after 2023 suggests strategic adjustments or market conditions favorably impacting performance. The trend toward increased invested capital in the latest years supports a restoration of growth initiatives aligned with enhanced shareholder value creation.

Consolidated net income attributable to Walmart

The net income shows a fluctuating trend over the years. It started at 14,881 million USD in 2020, decreased to 13,510 million USD in 2021, and slightly increased to 13,673 million USD in 2022. There was a notable decline in 2023 to 11,680 million USD. However, in the subsequent years, a significant recovery and growth are observed, with net income rising to 15,511 million USD in 2024 and further increasing sharply to 19,436 million USD in 2025.

Net operating profit after taxes (NOPAT)

NOPAT demonstrates a general downward trend between 2020 and 2023, beginning at 18,200 million USD in 2020 and decreasing to 18,130 million USD in 2021. This decline continues more sharply through 2022 (15,307 million USD) and 2023 (13,880 million USD). From 2024 onwards, a strong recovery is evident, with NOPAT rising significantly to 18,517 million USD and then to 22,003 million USD in 2025.

Overall Analysis

Both net income and NOPAT experienced declines during the early years, particularly from 2020 to 2023, suggesting pressures on profitability possibly due to operational or market challenges. The drop in NOPAT is more pronounced, indicating operational efficiency or cost factors impacting returns after taxes. From 2024 to 2025, a notable reversal occurs, showing substantial growth in both profitability measures that surpass the initial levels reported in 2020. This suggests the company improved its operational performance and overall profitability during the latter period, potentially reflecting successful strategic initiatives, enhanced revenue generation, or cost management improvements.

The analysis of the provision for income taxes and cash operating taxes over the reported years reveals several key trends and insights into the company's tax-related financial performance.

Provision for Income Taxes

The provision for income taxes exhibits fluctuation across the examined periods. Starting at a lower level in the earliest year, it increased significantly in the second year, reaching its highest recorded value during this span. Following this peak, the provision decreased notably in the third year, indicating variability in taxable income or changes in tax regulations. Subsequently, it showed a moderate upward trend in the last two years, though not surpassing the earlier peak. Overall, this item demonstrates a pattern of volatility rather than steady growth or decline.

Cash Operating Taxes

Cash operating taxes show a generally increasing trend over the entire period. The values rise steadily year over year with minor deviations, suggesting growing tax cash outflows possibly driven by increased operating income or changes in cash tax settlement timing. The most notable increase occurs in the final year analyzed, which could indicate heightened tax payments or shifts in tax planning strategies resulting in greater actual cash disbursements for taxes.

Comparison and Interpretation

The divergence between provision for income taxes and cash operating taxes is apparent, where cash taxes consistently trend upwards more smoothly, whereas provisions are more volatile. This may reflect differences in accrual versus cash accounting methods for taxes, timing differences in tax payments, or adjustments due to tax law changes or deferred tax assets and liabilities. The steady increase in cash operating taxes, particularly the sharp rise in the latest period, warrants further investigation into the company's tax payment policies and operational profitability.

Total reported debt & leases

The total reported debt and leases exhibit a decreasing trend from January 31, 2020, to January 31, 2022, declining from 72,433 million US dollars to 57,323 million US dollars. This downward trend is somewhat reversed in the subsequent periods, with an increase to 61,321 million US dollars by January 31, 2024, before a slight decrease to 60,114 million US dollars in January 31, 2025. Overall, the debt and leases remain below the initial 2020 level, indicating a reduction over the five-year span despite minor fluctuations.

Total Walmart shareholders’ equity

Shareholders' equity shows a generally increasing trajectory over the analyzed periods. Starting at 74,669 million US dollars in January 2020, it rises steadily to peak at 83,253 million US dollars in January 2022. Although a dip occurs in January 2023 to 76,693 million US dollars, the equity rebounds strongly in subsequent years, reaching 91,013 million US dollars by January 2025. This pattern suggests growth in the company’s net value with temporary volatility in early 2023.

Invested capital

Invested capital demonstrates a consistent downward trend from 167,329 million US dollars in January 2020 to a low of 149,558 million US dollars in January 2023. However, after this point, there is an upward correction onward to 161,279 million US dollars by January 2025. This movement could reflect strategic capital management with periods of capital reduction followed by reinvestment or asset growth.

The financial analysis of the given period reveals significant fluctuations in the company's economic profit, invested capital, and economic spread ratio, which provide insights into its financial performance and capital efficiency.

Economic Profit Trends

The economic profit exhibited considerable variability over the analyzed years. It started at a high level of 3,301 million US dollars and slightly decreased to 3,085 million in the following year. A sharp decline was observed in the third year, dropping to 709 million, and then turning negative at -126 million in the subsequent period. However, economic profit rebounded strongly in the last two years, reaching 3,675 million and further increasing to 6,255 million US dollars. This pattern indicates a period of underperformance followed by a substantial recovery and growth in value creation beyond the cost of capital.

Invested Capital Trends

Invested capital showed a consistent downward trend initially, moving from 167,329 million to 149,558 million US dollars over four years. This decline suggests the company was possibly optimizing or reducing its capital base during this period. In the last two years, there was an increase, with invested capital rising again to 155,389 million and then 161,279 million US dollars. The partial recovery in invested capital levels may reflect strategic reinvestments or growth initiatives.

Economic Spread Ratio Trends

The economic spread ratio, which measures the difference between return on invested capital and cost of capital, closely mirrors the economic profit trends. It initially decreased from 1.97% to 1.88% and further to a low of 0.45%, followed by a negative spread of -0.08%, implying that the company’s returns were below its cost of capital during that period. A sharp positive reversal occurred afterward, with the spread ratio improving significantly to 2.36% and then to a robust 3.88%. This increase suggests enhanced capital efficiency and stronger profitability relative to the cost of capital in the most recent years.

Overall, the data indicates a challenging phase with declining economic profits and capital efficiency, peaking in a negative economic spread. This was succeeded by a phase of strong financial recovery and improvement in value generation, with both economic profit and economic spread ratio reaching higher levels than initially observed. Invested capital trends suggest an initial contraction followed by reinvestment, aligning with periods of economic profit recovery. The company appears to have moved through a cycle of restructuring or efficiency gains leading to renewed financial strength by the end of the period.

Net Sales

Over the six-year period, net sales demonstrate a consistent upward trend. There is a steady increase year over year, starting from approximately 520 billion US dollars in early 2020 and reaching over 674 billion US dollars by early 2025. This positive trajectory indicates sustained growth in the company’s revenue-generating activities.

Economic Profit

The economic profit shows notable volatility during the observed years. Starting at 3.3 billion US dollars in early 2020, it slightly declines in 2021 and plunges significantly in 2023, even reaching a negative value of -126 million US dollars, indicating a loss in that fiscal year. However, after this downturn, there is a robust recovery, with economic profit rising sharply to 3.7 billion US dollars in 2024 and further to 6.3 billion US dollars by 2025. This pattern suggests fluctuating operational efficiency or possibly varying cost structures impacting profitability despite rising sales.

Economic Profit Margin

The economic profit margin parallels the trend observed in economic profit and adjusts to changes in net sales and profit levels. Beginning at 0.63% in 2020, the margin declines annually until it becomes slightly negative in 2023 (-0.02%), indicating a brief period where the company’s returns did not cover the cost of capital. Subsequently, the margin recovers strongly, reaching 0.93% by 2025, exceeding the initial margin level in 2020. This recovery signals improved capital efficiency and profitability relative to invested capital in the later years.