Walmart (WMT +0.99%) just gave investors a fresh set of results and a new outlook, and the numbers were solid. Revenue rose 5.6% in its fiscal fourth quarter (the period ended on Jan. 31, 2026), and adjusted earnings per share came in at $0.74, up more than 12% year over year. Both figures came in ahead of analysts' consensus forecasts.
But I'm not buying the stock here.
The problem is not the quarter. It's the price investors are paying for it -- especially when you can buy a fast-growing retailer like Amazon (AMZN 1.38%) at a meaningfully lower valuation.
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Momentum in some important areas
To Walmart's credit, its momentum is notable -- especially for a retailer of its size.
Its global e-commerce sales rose 24% in the quarter. Even more, these e-commerce sales notably represented a meaningful 23% of total net sales.
Additionally, Walmart U.S. comparable sales, a metric that compares stores open at least a year and excludes fuel, increased 4.6%. Management said transactions grew 2.6% in Walmart U.S., suggesting customer traffic is still driving growth, not just higher prices.
Higher-margin lines are showing up more clearly, too. The company said its global advertising business grew 37% in the quarter, including advertising revenue from its TV operating system platform VIZIO. And Walmart Connect -- the company's retail media business unit and advertising platform -- in the U.S. grew 41%. Finally, the company's membership fee revenue grew 15.1% globally.
Further, Walmart's profit picture in the quarter was better than the sales growth rate would suggest. Operating income rose 10.8%, and the company said operating income grew faster than sales due to higher gross margins, expense leverage, and improved e-commerce economics, helped by a better mix (a higher percentage of sales going to higher-margin products and services).
That's some impressive momentum. Walmart is steadily becoming more digital and more profitable.
Where it gets challenging
But things become more concerning when you consider Walmart's outlook.
Management expects fiscal 2027 net sales to increase 3.5% to 4.5% on a constant-currency basis. As for profitability, the company forecast constant-currency-adjusted operating income to grow 6% to 8%. And for its full-year adjusted earnings per share, management guided for $2.75 to $2.85.
At Walmart's current stock price, the stock trades at about 45 times the midpoint of management's fiscal 2027 adjusted EPS guidance.
At this valuation, Walmart has to maintain strong comparable sales growth, keep expanding its margins, and continue growing higher-margin streams like advertising and membership with very few hiccups.
NASDAQ: WMT
Key Data Points
Walmart did try to bolster the shareholder-return story. The company announced a new $30 billion share repurchase authorization and increased its annual dividend to $0.99 per share. Those are real positives. But they don't erase the valuation problem.
I'd rather buy Amazon stock
Now look at the alternative.
Amazon's most recent quarter showed net sales growth of 14%, with AWS segment sales up 24%. CEO Andy Jassy said Amazon expects to invest about $200 billion in capital expenditures in 2026, including in AI and other long-term opportunities -- and he anticipates a "strong long-term return" on this capital.
Of course, there are risks to big spending like this. But here's the kicker: Amazon's price-to-earnings ratio is just 28. Even more, Amazon isn't just a retail operation; it comes with a lucrative cloud computing business that grew sales 24% year over year in the company's most recent quarter.
The risk for Walmart investors is not that the business will suddenly break. It is that anything merely "fine" becomes a problem when the stock is priced for near-perfection. And the bigger reason I wouldn't buy Walmart stock today is even simpler: I'd rather buy Amazon.
