WMT

Walmart is about as high-quality as large-cap retail gets, and the numbers show it. Revenue has compounded steadily from $568B (FY2022) to $706B (FY2026, +4.7% YoY), net income from $13.7B to $21.9B (+12.6%), and diluted EPS to $2.73 (+13.3%). ROE is a strong 22.0%, operating cash flow grew 14.1% to $41.6B (roughly $15B of free cash flow after $26.6B capex), and the balance sheet is a fortress: $34.6B long-term debt against $99.6B of equity and $10.7B cash. Management is returning capital aggressively — buybacks up 80% to $8.09B and dividends up 12.2% to $7.51B — while the MD&A highlights accelerating digital, with eCommerce contributing ~4.3% to U.S. comps versus 2.9% a year earlier. This is a durable, defensible compounder.

The catch is earnings quality and momentum beneath the headline. Operating income rose just 1.6% to $29.8B even as net income grew 12.6% — meaning most of the bottom-line growth came from below the operating line (lower cash taxes under the OBBB Act and other items) rather than core operations. Operating margin is a thin 4.2% and net margin only 3.1%, so small cost swings matter a lot. Comps are decelerating: Walmart U.S. +4.3% (from +4.8%) and Sam's Club +2.9% (from +4.7%). The MD&A is candid that pricing strategies include 'absorbing cost increases instead of passing them on,' which pressures gross margin, and that with 'less than one third of what we sell in the U.S. imported' (mainly China, Mexico, Vietnam, India, Canada) the company sits in a 'highly dynamic tariff environment.'