The Premium On WMT Stock Vs What Its Peers Deliver
Walmart’s stock commands a premium price tag, but its growth and profit numbers look more like they belong in the bargain aisle.
Walmart (WMT) is the world’s largest retailer, a behemoth of logistics and low prices that serves millions of customers daily. Its stock, trading around $103.70 a share, has seen some recent weakness, returning -14% over the last three months. Yet it still carries one of the richest valuations in its competitive group. The question is, why?
The company trades at 36.3 times earnings, a premium price tag that puts it near the top of its peer group. But its business performance ranks squarely in the middle. Is the market seeing a transformation the numbers don’t yet fully reflect, or is it simply paying for a familiar name?
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A quick look at the competitive landscape brings the mismatch into sharp focus. Amazon.com, for instance, trades at 20.6 times trailing earnings, though that multiple is flattered by an outsized quarter in its trailing-year earnings base, so the true gap with Walmart is narrower than the headline numbers suggest. Even accounting for that, Amazon’s revenue grew 15.8% over the last twelve months with a solid 12.1% operating margin, well ahead of Walmart’s 5.9% growth and 4.2% margin.
The comparison with Target actually cuts the other way: Target’s revenue grew just 0.5% over the last twelve months, a fraction of Walmart’s 5.9%, yet it trades at a lower 21.8 times earnings with a slightly better operating margin of 4.5%. Target’s +74% one-year stock return versus Walmart’s +2.0% reflects market sentiment rather than this operating comparison. Costco is the sharper counterpoint: it grows faster than Walmart (9.2% revenue growth) and still trades at a richer 47.6 times earnings; proof the market doesn’t automatically pay less for slower growth.
| WMT | AMZN | COST | TGT | KR | HD | |
|---|---|---|---|---|---|---|
| Market Cap ($ Bil) | 826.4 | 2,785.2 | 420.7 | 75.1 | 36.5 | 333.6 |
| PE Ratio | 36.3 | 20.6 | 47.6 | 21.8 | 36.0 | 23.8 |
| LTM Revenue Growth | 5.9% | 15.8% | 9.2% | 0.5% | 0.4% | 2.2% |
| LTM Operating Margin | 4.2% | 12.1% | 3.8% | 4.5% | 1.3% | 12.4% |
| 12M Stock Return | 2.0% | 15.6% | -4.2% | 74% | -17.6% | -14.2% |
*Kroger’s 36.0x reflects a trailing year containing one loss-making quarter; on a normalized four-quarter basis, the multiple is closer to 12x.
The Market Is Betting on a New, Higher-Margin Business Model
The premium valuation isn’t for the Walmart of yesterday. The market is paying for a fundamental shift in the company’s business model. Management is building a more profitable enterprise on top of its vast retail foundation, powered by faster-growing, higher-margin businesses. On its latest call, the company highlighted global advertising growth of 38%, a 52% jump in U.S. marketplace net sales, and membership fee revenue growth of 17%. According to the CFO, “almost half of the growth came from areas like membership, advertising, marketplace.”
But there is an honest catch to this growth story. The company’s aggressive price investments are currently being funded in part by a one-time benefit of approximately $2.9 billion in tariff refunds. This cash infusion allows Walmart to cut prices to gain market share. One nuance: in-store comps were “down low single digits in Q2,” though management attributed this specifically to the health and wellness business, a trend that predates the tariff refunds, while overall U.S. comp sales were still positive at 2.6% for the quarter, with management saying it continues to gain market share.
What Will Prove the New Model Is Real?
The evidence suggests the market is right to be excited about Walmart’s transformation, but the tariff refund is a significant asterisk. The company is indeed generating impressive leverage: the CFO noted operating income grew roughly 10% excluding tariff impacts against a 2.5% U.S. comp — about four times that comp figure, a feat “not seen in 2 decades.” That ex-tariff 10% figure, not the 5.9% headline revenue growth cited above, is the right yardstick for the raised guidance below. For investors who prefer to bet on the entire sector rather than a single name, a consumer staples ETF like XLP offers broad exposure.
The debate boils down to sustainability. Can these new, high-margin businesses carry the load after the one-time benefits fade? The single most important thing to watch is management’s own forecast for profitability. The company has raised its full-year guidance for adjusted operating income growth to a range of 7.0% to 8.5%. Hitting the upper end of that range would be a powerful signal that the new, more profitable Walmart is here to stay.
This piece pulled one thread; our full peer-by-peer dashboards for WMT lay every metric side by side, updated daily.
The Best Stock In The Group Is Still A Single Stock
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