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2026年2月23日星期一

Financial instituion newsletter 2026

Feb 23 2026 rated 7/10

Walmart (WMT) Is Expensive. Buy It Anyway?

Discount retail is having a moment.

With tariff fears rattling consumers and a shaky macro backdrop, Americans are trading down. That's good for Walmart (WMT).

Financial pros seem to agree. Our TrackStar data shows Walmart leading all discount retailer searches last month with 8,291 queries, more than Costco (COST), Target (TGT), Dollar General (DG), and Dollar Tree (DLTR) combined.

The company just reported FY2026 Q4 earnings, and the results were solid. The stock, however, trades at a steep premium.

Is it worth it? Here's the breakdown.

Walmart's Business

Walmart is the world's largest retailer by revenue, operating nearly 10,500 stores and clubs across 19 countries under dozens of banners.

Its scale is unmatched. Roughly 90% of the U.S. population lives within 10 miles of a Walmart store, giving it a physical footprint no competitor can replicate overnight.

Walmart segments its business into the following areas:

Walmart U.S. (67% of total revenues) - General merchandise, grocery, health, and wellness products sold through physical stores and ecommerce
Walmart International (17% of total revenues) - Operations in Canada, China, Mexico, and other markets
Sam's Club (16% of total revenues) - Membership-based warehouse clubs offering bulk goods and services

In its most recent quarter, Walmart posted TTM revenues of $703.1 billion, up 4.3% year over year. EPS grew 18.2%, and the company raised its dividend 12.3%.

Advertising revenue and its third-party marketplace are becoming meaningful contributors, adding higher-margin dollars to what was historically a razor-thin business.

On the strategic side, Walmart is building out its flywheel. Walmart+ membership, in-store media, and data monetization are all growing. These aren't just nice-to-haves. They structurally improve margins over time.

Financials

Source: Stock Analysis

Revenue has grown every year since 2019, with 5-year CAGR of 5.1%. That's steady, not spectacular.

Operating margins have held firm around 4.1%-4.3%, and gross margins remain in the 24%-25% range, consistent across the cycle.

Free cash flow came in at $15.3 billion on a TTM basis, up from $12.7 billion in FY2025. Operating cash flow is a healthy $41 billion.

CAPEX runs around $13-14 billion annually, leaving meaningful room after that for dividends and buybacks. The dividend yield is modest at around 1%, but dividend growth has been consistent, up 9.2% in FY2025.

Long-term debt is manageable relative to the cash generation of the business.

Valuation

Source: Seeking Alpha

This is where things get complicated.

Walmart trades at 44.3x trailing GAAP earnings and 43.9x forward earnings. That's a premium to every name on this list except Costco, which fetches 53.4x.

On a price-to-cash flow basis, Walmart trades at 24.6x versus Target at just 7.7x and Dollar General at 9.2x. The market is paying a steep premium for Walmart's consistency and its evolving, higher-margin business mix.

At 1.5x forward sales, it's not cheap on that metric either.

Growth

Source: Seeking Alpha

Walmart's trailing revenue growth of 4.3% is respectable for a company this size, but Costco is growing at 8.3% and Dollar General at 4.9%.

Where Walmart separates itself is EPS growth. Diluted EPS grew 18.2% year over year and 38.1% on a 3-year CAGR basis. Levered free cash flow grew 26.8% over the same period.

Those are not the numbers of a slow-moving retailer. They reflect improving margins and disciplined capital allocation.

Profitability

Source: Seeking Alpha

Walmart's gross margin of 24.9% lags Dollar Tree and Dollar General, but its return on equity of 23.7% and return on total capital of 11.0% are solid.

Costco's returns are stronger, but Costco also benefits from a membership model that front-loads profits.

Walmart's cash from operations at $41.0 billion dwarfs every other company on this list. Target generates $6.8 billion and Costco $14.8 billion.

That cash engine is the real story.

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Our Opinion 7/10

Walmart is a well-run business with improving margins, exceptional cash flow, and a sharpening digital strategy.

The problem is the price. At 44x earnings, you're paying for perfection. Any stumble in consumer spending or a guidance cut could send shares lower quickly.

For long-term investors who can stomach a full valuation, Walmart is a core holding. But don't expect a bargain here.

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