Walmart (NYSE:WMT) shares may be a safe investment, but are they a growth investment?

This week’s international stock deep dive in on Walmart (NYSE:WMT). While most of our Australian readers may not have shopped there, many will have heard about it – even if it is just because they own a small cap that has a deal to sell their product into Walmart outlets.

Being the company that it is, Walmart is a safer investment than most other stocks. But is it a growth stock – has it got more room to grow? In this article, we address that question.

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Who is Walmart (NYSE:WMT)?

Walmart is no ordinary supermarket chain. It is a chain of hypermarkets, operating outlets that offer not just groceries but household items too. Any Australian who has been to one can attest to the fact that it is no Coles or Woolworths.

The company was founded in 1962 with the first store opened in Arkansas by Sam Walton. Prior to this, he owned a Ben Franklin store and successfully turned it around by selling products at lower prices to get higher-volume sales at a lower profit margin.

While most discount stores were in big cities and only offered discounts on small items, Walton set up shops in smaller towns. Other unique traits included that the stores were kept open longer hours than competitors, big parking lots that would be free for consumers to park at. Even getting customers to get the goods themselves and pay at the exit was an innovation at the time.

Despite the cult around the elder Walton, it was a slow expansion story with the company only expanding outside Arkansas in 1968 and only setting up shop on the West and East Coasts in the early 1990s.

Today, Walmart is the world’s largest company by revenue with over US$681bn generated in FY25, up 5% from the year before. For comparison’s sake, Amazon generated just US$638bn (albeit with 11% growth), Apple made $391bn and Berkshire Hathaway made $371bn. Walmart has held the title for over a decade.

The company employs over 2m people across the world, the bulk of whom are in North America. It has direct outlets or investments in several countries including the UK, China and several countries in Latin America.

Walmart also owns Sam’s Club stores, which are like regular outlets but are for specific members only. The company’s shares are up over 120% in the last 5 years.

The past was good, but what about the future?

In the shorter term, Walmart is battling inflation, and winning for the most part. Its profit for FY25 (the 12 months to January 31 2025) came in at $19.4bn, up 25% from FY24. It made a 7.9% Return on Assets and 15.5% Return on Investment. For FY26, Walmart is expecting 3.75-4.75% sales growth (a target updated from the original 3-4% guided to after its FY25 results) and EPS of $2.50-2.60 equating to a profit of $20-20.7bn.

In the medium term, it is battling Amazon in the eCommerce space. Yes, it is behind at the moment, but is gradually catching up. Its eCommerce sales are 14% of its sales although this now over $100bn and they have continued to grow post-pandemic even though many other eCommerce company revenues fell.

Walmart has several advantages over its peers including its logistics and store networks, its cash reserves, the fact that it is a ‘one stop shop’ as well as the mix of goods, both essentials that are purchased regularly and bigger ticket items purchased less frequently but are higher margin for the company. You see, people like to see goods before they buy them. And some may be paranoid about having a package stolen if it is just left at their home – thank goodness there’s Click and Collect.

Battling Amazon

In late May 2023, Walmart opened its first Market Fulfilment Centre at its home city of Bentonville, Arkansas and it has opened over 40 since then. These centres, now called Accelerated Pickup and Delivery and are expected to amount to over 400 eventually, will increase the number of orders the store will be able to fulfil in each and every day.

Walmart is also building its own marketplace of third party sellers, just like one that Amazon has. Walmart has over 200,000 of these sellers and even though it has only 10% of Amazons, it is growing its base much faster (by 25% in the last 12 months).

Another way in which Walmart is competing with Amazon is with its Walmart+ membership program. For US$98 per annum (or $13 monthly), you get benefits including free delivery, early access to Black Friday sales, fuel savings and a Paramount+ Essential Plan.

Yet another innovation Walmart is working on is having EV chargers at its stores. In 2023, it told investors it had 1,300 fast-charging stations and planned to keep expanding the network. While the company has not given running commentary since them, it plans to install charges at ‘thousands’ of locations by 2030 – we know there are 5,200 Walmart and Sam’s Club stores and 90% of Americans live within 10 miles of one.

Our valuation of Walmart

Over the 6 years, consensus estimates expect its earnings per share to double. Consensus estimates are only avaliable up to 2030, but expect a cumulative 25% growth. There are 40 analysts who have a mean target price of $113.1, with estimates ranging between $64 and $129.

Walmart is trading at 36.2x P/E and 4.6x PEG for FY27. This may appear overvalued as its peers trade at 19.6x, although some trade higher – CostCo for instance is 46x and it only makes half the revenue that Walmart does. .

There are risks with Walmart including a downturn in the US economy than has been anticipated so far and supply chain issues taking a turn for the worse. It must also be acknowledged that the company’s margins are not particularly high, below 5%. It has taken some steps such as closing stores in the US with a poor financial performance will help in the short-term. But this is not Australia where Coles and Woolworths have an effective duopoly – it is as close to a real-life example of perfect competition as you can eget.

Whether or not you invest in Walmart, it is a company all investors should keep their eye on. This is for two reasons. First, because their competitors will try and follow them. And second, they can provide major hints into consumer behaviour that can be useful for your own investing decisions.