Investors comparing the two largest U.S. retailers face a classic trade-off: Walmart looks cheaper on every headline valuation metric, while Costco shows stronger returns and a cleaner balance sheet. The gap between price and underlying business quality makes the question of which stock is the better buy dependent on whether an investor prioritizes valuation or enterprise performance.
Price and multiples
At the time of comparison, Costco's share price sits at $943.12 and Walmart's at $112.60. Market capitalizations are roughly $420.35 billion for Costco and $887.72 billion for Walmart. On trailing earnings, Costco's P/E is 47.3x versus Walmart's 39.3x. Forward P/E figures show Costco at 46.0x and Walmart at 38.4x. Other multiples tell the same story: EV/EBITDA is 29.5x for Costco and 21.5x for Walmart, while price-to-book is 12.5x versus 9.5x.
Growth-adjusted valuation also favors Walmart. Costco carries a PEG ratio of 3.72, compared with Walmart's 1.83, implying the market currently pays far less per unit of expected growth for Walmart than for Costco. Analyst targets reflect differing views as well: expected upside from analysts is about 16.1% for Costco and 25.5% for Walmart. Independent fair-value assessments indicate both names trade above intrinsic estimates, with Costco about -14.2% relative to its fair value and Walmart about -25.1%.
Business quality and returns
The operational profile shifts the advantage. Costco's recent revenue growth outpaced Walmart's, expanding 9.2% year-over-year versus Walmart's 5.9%. Returns measures favor Costco: return on equity is roughly 29.2% at Costco compared with 25.5% at Walmart, and return on invested capital is 21.8% versus 13.3% - a meaningful gap that shows Costco generates substantially more return per dollar of invested capital.
Margins and cash generation show different strengths. Walmart reports a higher gross margin of 25.0% against Costco's 12.9%, reflecting Walmart's broader retail mix and merchandise markups. Net income margins are close, roughly 3.0% for Costco and 3.1% for Walmart. On cash-flow metrics, Costco posts a free-cash-flow yield of 2.1% versus Walmart's 1.4%. Dividend yields are modest for both, with Walmart at 0.9% and Costco at 0.6%.
Balance sheet and leverage
Leverage profiles differ sharply. Costco carries a debt-to-equity ratio of about 24.6%, indicating a relatively light debt load. Walmart's debt-to-equity ratio is substantially higher at 80.1%. That difference underpins the view that Costco operates with a cleaner balance sheet.
Scale and growth trajectory
Scale remains Walmart's advantage. Last twelve months revenue at Walmart is approximately $713 billion versus roughly $275 billion at Costco. Despite the size gap, Costco's faster growth rate narrows the pace difference between the two retailers.
How to weigh the trade-offs
For investors focused primarily on valuation, Walmart wins on nearly every multiple, sports a lower PEG and offers a higher dividend yield. For investors prioritizing business quality, Costco looks stronger: higher ROIC, faster recent top-line growth, a lower leverage profile and a membership model that supports recurring revenue dynamics.
One important reality check: both stocks trade above their intrinsic value estimates, making Costco the relatively less overvalued name by that measure but still above fair value. The market appears to be assigning considerable value to Walmart's e-commerce transformation and options such as Flipkart and advertising monetization.
Downside and execution risks
Valuations are elevated for both companies, which reduces tolerance for execution missteps should consumer demand slow. At current prices, neither stock offers a significant margin of safety, leaving investors exposed to operational setbacks or a deteriorating consumer environment.
Data snapshot
- Prices: Costco $943.12; Walmart $112.60
- Market cap: Costco $420.35B; Walmart $887.72B
- P/E (LTM): Costco 47.3x; Walmart 39.3x
- PEG: Costco 3.72; Walmart 1.83
- ROIC: Costco 21.8%; Walmart 13.3%
- D/E: Costco 24.6%; Walmart 80.1%
- LTM revenue: Costco $275B; Walmart $713B