Amazon.com (NASDAQ:AMZN) and Walmart (NYSE:WMT) dominate the retail market in America and, increasingly, many other areas of the world. As they've risen to power, they've created fortunes for investors along the way.

But which of their stocks is the better buy today?

Two king chess pieces surrounded by other chess pieces that were knocked over

Image source: Getty Images.

Competitive strategy

Walmart's more than 11,000 stores in 27 countries serve as not just as the face of the company's traditional retail operations, but also as valuable hubs for e-commerce order fulfillment and delivery. Walmart is investing aggressively to transition into an omnichannel retailer that seamlessly blends its in-store and online operations. And in the U.S., where roughly 90% of the population lives within 10 miles of one of its locations, Walmart's massive store base provides a powerful competitive advantage that other traditional retailers can't match.

Amazon, however, is able to circumvent its lack of stores with a network of distribution centers strategically placed around the world. These high-tech warehouses allow the e-commerce juggernaut to offer one-day shipping on more than 10 million items. So while Walmart's stores provide a high level of convenience for shoppers, Amazon is largely able to offset this with its free-shipping options.

Moreover, while Walmart's retail operations account for nearly the entirety of its revenue, Amazon is a far more diverse business. Amazon Web Services is the world's leading cloud-computing infrastructure service -- one that some analysts believe could be worth a whopping $350 billion by 2022. Amazon also has a fast-growing digital advertising business that's on track to generate $22 billion in annual sales by 2022. These businesses provide sizable profits that Amazon can use to further strengthen and expand its e-commerce operations.

All told, with several powerful businesses fueling its growth, Amazon is in a stronger competitive position than Walmart.

Advantage: Amazon

Financial fortitude

Let's now review how Amazon and Walmart stack up in regards to some key financial metrics.

Metric

Amazon

Walmart

Revenue

$241.55 billion 

$515.64 billion 

Operating income

$14.91 billion

$21.75 billion

Operating cash flow

$34.36 billion

$26.16 billion

Free cash flow

$20.74 billion

$15.42 billion

Cash and investments

$37.02 billion 

$9.26 billion 

Debt

$23.32 billion 

$53.72 billion 

Data sources: Morningstar and company filings.

Walmart generates more than twice as much revenue as Amazon and significantly more operating profits. Amazon, however, produced greater operating and free cash flow over the past year. Given the online juggernaut also has a stronger balance sheet -- with nearly $14 billion in net cash versus $44 billion in net debt for Walmart -- Amazon has the edge here.

Advantage: Amazon

Growth

When it comes to growth, this better buy battle is particularly one-sided. Amazon's revenue and operating profits have expanded at vastly superior rates than those of Walmart in recent years.

AMZN Revenue (TTM) data by YCharts.

Wall Street expects these trends to continue. Amazon's revenue is projected to increase roughly 18% in both 2019 and 2020. Its earnings per share, meanwhile, are expected to rise an even more impressive 33% annually over the next five years, fueled by the strong growth of AWS and Amazon's digital ads business.

Walmart, however, is forecast to grow its sales by only about 3% annually over the next two years. Moreover, its earnings are expected to increase by less than 5% annually over the next five years, with its investments in Indian e-commerce company Flipkart likely to weigh on its results during this time.

Clearly, Amazon has a significant advantage in terms of expected revenue and profit growth in the coming years.

Advantage: Amazon

Price

Lastly, let's see how these retail titans compare in regards to some common stock valuation metrics.

Metric

Amazon

Walmart

Price-to-sales ratio

4.11 

0.63 

Price-to-free-cash-flow ratio

47.89 

20.99 

Trailing price-to-earnings ratio

84.22

39.53

Forward price-to-earnings ratio

52.74

22.37

Data source: Yahoo! Finance.

Walmart's stock is less expensive based on sales, cash flow, trailing earnings, and analysts' forward earnings estimates. This is to be somewhat expected, given Amazon's superior growth rates. Still, Walmart's shares are clearly priced lower than Amazon's. 

Advantage: Walmart

The better buy is...

Walmart's stock may be cheaper, but Amazon's diversified revenue streams, stronger balance sheet, and greater growth prospects make it a better long-term investment.