Walmart (WMT -0.10%) stock has traded for more than half a century. It enriched numerous investors as it emerged from its roots in rural Arkansas to become the world's largest retailer, still managing to sell more than e-commerce giant Amazon.
Now, with a market cap of approximately $780 billion, higher-percentage growth is more difficult to attain than in the past. Although Walmart stock outperformed the S&P 500 (^GSPC -0.70%) over the previous five years, the question is whether it can repeat that feat over the next five.
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The state of Walmart
Walmart is best known for its retail operations in North America. With more than 4,600 of its 10,750 stores in the U.S., more than 90% of the country's population is within 10 miles of a Walmart or Sam's Club store. Unlike Amazon, Walmart's strength is in both brick-and-mortar retailing and e-commerce, and that optionality gives it a competitive advantage.
To that end, it has looked to e-commerce for growth, particularly in international markets. In the first quarter of fiscal 2026 (ended April 30), Walmart eCommerce grew 22% yearly across the globe. Still, it had numerous failures in markets outside North America with physical stores, making online retailing a more critical growth area.
Additionally, Walmart has long billed itself as the low-cost leader. Since its early days, superior supply chains have served as a cornerstone of the company's ability to compete on price.
Unfortunately, much of its cost advantage came from buying items made in lower-cost markets, such as China. With higher tariffs pressuring Walmart to raise prices, the higher costs could bode poorly for the company's bottom line, especially since President Donald Trump urged the company to "eat the tariffs."
Such news did not prompt Walmart to reduce its growth guidance for net sales in fiscal Q2, which it says will be between 3% and 4%. That consistency is likely a testament to its decades-long track record of squeezing out excess costs.
Still, if tariffs become more than a short-term concern, Walmart could easily face downward revisions in this guidance.
Walmart's financial picture
For now, Walmart's struggles have not stopped its growth. In fiscal Q1, revenue of almost $166 billion rose 2.5% from year-ago levels. That was below the 5.1% rise in revenue in fiscal 2025 (ended Jan. 31).
Unfortunately, investment-related losses weighed on the bottom line. That led to the net income attributable to Walmart falling to $4.5 billion, down 12% from the year-ago quarter.
As mentioned, Walmart has so far not reduced its guidance on net sales growth. That strength may explain why the stock has outperformed the S&P 500 by a wide margin over the last year.
Nonetheless, that increase could make its P/E ratio of 42 more concerning. Its average earnings multiple for the last five years is 33, meaning new challenges such as higher tariffs could place more downward pressure on the stock price.
Additionally, new investors will probably not get much help from its dividend. The payout has risen yearly since its introduction in 1974, making Walmart a Dividend King, and in February, Walmart raised its annual dividend 13% to $0.94 per share. However, since its dividend yield of just over 0.9% is well under the 1.3% average of the S&P 500, the payout is probably not high enough to draw additional interest from investors.
Where will Walmart be in five years?
A lot can happen over five years, but given its current state, Walmart stock is more likely to underperform the S&P 500. The company's continued growth should mean the stock rises over that time frame.
The question is to what extent it will move higher. Headwinds such as the company's massive size, rising tariffs, and an elevated valuation could slow the stock's growth. Moreover, the modest dividend yield makes it less likely to draw new income investors to the stock despite the long track record of payout hikes.
Ultimately, Walmart stock can protect one's wealth and give investors a modest amount of growth and income. However, such conditions are likely not compelling enough for investors to choose it over the safety of investing in an S&P 500 index fund.
