Comparing Walmart (WMT +0.96%) and Costco Wholesale (COST +1.18%) is a good exercise for investors seeking a durable business, as both companies are arguably exceptionally durable. Both have proven their ability to attract shoppers and grow sales across different economic environments.
But Wall Street has already recognized this durability, giving both stocks very high valuations. This means investors have to carefully weigh the two companies' growth trajectories against the expectations baked into their share prices before investing.
A good way to take a close look at the stocks of these two high-quality companies is to compare them. Which of these two market leaders is the better buy?
Image source: The Motley Fool.
Walmart's high-margin momentum
Walmart's latest results do a good job of capturing the company's current state. The results highlight a business that is steadily becoming more digital and more profitable.
In its fiscal fourth quarter (ended Jan. 31, 2026), Walmart's revenue rose 5.6% year over year. And adjusted earnings per share in the period came in at $0.74 -- up more than 12% year over year. And Walmart U.S. comparable store sales increased 4.6%, driven by a healthy 2.6% increase in customer transactions. Sam's Club -- a membership-based wholesale retailer that is a Walmart subsidiary -- also saw comparable sales growth in the U.S., rising 2.8%.
NASDAQ: WMT
Key Data Points
Further, Walmart's global e-commerce sales surged 24% in the quarter, now representing a meaningful 23% of total net sales. And Walmart's global advertising business jumped 37%.
This shift toward higher-margin revenue streams is already impacting the bottom line.
Operating income rose 10.8% in the quarter, outpacing top-line growth, with management explicitly calling out improved economics in e-commerce as one of the drivers of this outsize growth.
Looking ahead, management expects this trend to persist, guiding for fiscal 2027 constant-currency-adjusted operating income to grow 6% to 8% -- a rate that meaningfully outpaces its projected 3.5% to 4.5% net sales growth.
Of course, buying into this growth story isn't cheap. As of this writing, Walmart trades at about 44 times the midpoint of management's fiscal 2027 adjusted earnings-per-share guidance. At this valuation, the company must maintain strong comparable sales growth and continue expanding its margins not just for the next few years but for the next decade and beyond.
Costco's steady execution
Costco is executing just as impressively, if not more so.
The membership-based warehouse retailer recently reported net sales of $68.2 billion for its fiscal second quarter (ended Feb. 15, 2026), up 9.1% year over year. When adjusted for changes in gasoline prices and foreign exchange, total company comparable sales rose 6.7% for the period.
This robust growth rate is a testament to the company's incredibly loyal customer base and its recurring revenue stream from membership fees.
Highlighting the power of its recurring revenue engine, Costco's membership fee income grew a stellar 13.6% year over year to $1.36 billion during fiscal Q2. This line item, however, benefited from a membership fee increase that the company rolled out in late 2024.
NASDAQ: COST
Key Data Points
Even more encouraging is Costco's recent digital momentum.
The retailer's adjusted digitally enabled comparable sales soared 21.7% in fiscal Q2, and the momentum persisted with 20.8% adjusted digital sales growth in the retail month of February.
But the market is well aware of Costco's consistently strong growth. This is why the stock currently trades at a staggering price-to-earnings ratio of about 54. A valuation like this leaves essentially no room for error, requiring years of mid-single-digit comparable sales growth, a steadily expanding operating margin, and continued membership fee increases just to justify the current price.
Which stock is the better buy?
So, which stock is the better buy today?
Both companies are firing on all cylinders. But Walmart looks like the slightly better choice for investors right now.
While both retailers command premium valuations, Walmart seems more deserving of its slightly lower premium valuation. I like the company's aggressive push into highly profitable alternative revenue streams -- particularly its advertising business -- giving it a clearer path to sustained margin expansion.
Costco is certainly ramping up its own digital efforts, and its recent e-commerce growth figures are promising.
But at 54 times earnings, Costco's stock is priced for near perfection. Walmart's valuation, while still demanding, offers a slightly more attractive setup given its increasingly diversified business and lower price-to-earnings ratio multiple.
Of course, I could be wrong, and Costco's loyal membership base could continue to defy valuation concerns. But at these prices, I'd rather bet on Walmart's evolving business model.
