Walmart (WMT -3.08%) stock has made countless millionaires since it was first listed on the stock market in 1970. You didn’t need to get in at the initial public offering (IPO) to see market-thumping returns from owning this retailing giant, either. Walmart shares rose over 150% in the five years ending in early March 2025, compared to a 94% gain in the S&P 500.
But can this well-known stock still deliver excellent long-term returns from here? Let’s look at a few factors that point to big gains ahead for Walmart shareholders, despite its lofty valuation.
Core business wins
Walmart’s recent operating results illustrate the power of massive scale and the timeless appeal of everyday low prices. The chain announced in late February that fiscal fourth-quarter (ended Jan. 31, 2025) sales in the core U.S. business rose 5% as consumers looked for savings to offset household budget pressures. Those gains easily outpaced rivals such as Target and Kroger. They came from a few big areas, too, including e-commerce growth, price leadership, and an expanding product assortment. “We’re gaining market share, our top line is healthy, and we’re in great shape with inventory,” CEO Doug McMillon said in a press release.
The other number that stood out was Walmart’s 3% customer traffic boost, which came on top of the prior year’s 4% spike. That level of customer loyalty is exactly what shareholders want to see from a retailer in a competitive industry. It suggests there’s a long runway for sales growth ahead, as well.
Growth segments
Even as the core in-person retailing business gains momentum, Walmart is making big strides at diversifying into more profitable areas beyond e-commerce. Its global advertising business jumped 29% last quarter, membership income rose 16%, and its marketplace segment jumped 34%. Each of these areas delivers better profitability than the wider business, which helps explain why adjusted operating profit rose 9%, or nearly double the pace of net sales growth.
It’s early days in all of these growth businesses, meaning there’s a good chance that Walmart’s operating margin will continue climbing beyond its current 4% rate toward the high single digits.
The price is high
The biggest drawback to buying Walmart’s stock today is its elevated price. Even after the recent market pullback, shares are valued at 40 times earnings and 1.1 times sales. Both figures are close to 10-year highs. For comparison, Costco Wholesale, which is growing faster and has much sturdier profits due to its membership income, is valued at 60 times earnings and 1.8 times sales.
WMT PS Ratio data by YCharts
Walmart could earn its premium over the next several years by continuing to win market share in the retailing business while leaning on its other growth initiatives to push profitability toward 6% of sales. Achieving those goals could easily support another decade of market-beating returns for investors.
On the downside, it’s likely that Walmart’s business will suffer along with the rest of the retailing industry if consumer spending keeps slowing. If you’re worried about an impending recession, you might prefer a consumer staples stock that pays a heftier dividend such as Procter & Gamble.
Yet in any case investors should be happy to have Walmart stock as part of a retirement portfolio that can eventually surpass $1 million. Its leadership position reduces the risk of a flameout in the business, while its many pathways to growth over the next decade provide ample avenues for excellent returns. That’s why this admittedly expensive stock belongs on your watch list, if not in your portfolio, today.
Demitri Kalogeropoulos has positions in Costco Wholesale. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.
