Better Stock to Buy Now: Walmart or Costco?

These two resilient companies have proven their worth again and again, even during tough times, but which is the better buy right now?

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When it comes to buying big, and buying cheap, there are two companies that continue to dominate the market. Those are Walmart (NYSE:WMT) and Costco (NASDAQ:COST). Both have proven to big strong winners on the market, providing investors with both dividends and returns. Furthermore, each have proven to be resilient even during downturns, with customers seeking the best price.

But which is better?

Let’s get into more recent performance, as well as the outlook for both of these resilient companies. And then, see which comes out on top.

Walmart

First, there’s Walmart, a company that is a solid buy for a number of reasons. Let’s first start of with recent earnings. Walmart has consistently exceeded analyst expectations for earnings per share (EPS) in the last four quarters. This indicates the company is performing better than anticipated. What’s more, it’s also topped revenue estimates over the same period. Beating revenue forecasts suggests strong sales and customer demand.

Add to this the company’s resilience. With inflation on the rise, consumers are likely to flock to discount retailers like Walmart seeking lower prices. This could boost Walmart’s sales in the coming months. Plus, Walmart has been aggressively expanding its e-commerce presence to compete with Amazon. This could be a significant driver of future growth, as online shopping continues to rise.

Of course, analysts love all this. Many rate the company a buy, with an average price target above its current stock price. Yet while not expensive, Walmart stock doesn’t really have a lot of wiggle room for higher growth compared to other stocks. As mentioned, there is still a lot of fierce competition in the retail space, as well as other discount grocers and e-commerce.

Costco

Let’s now turn our attention to Costco stock. The company is similar to Walmart but with a bonus: subscriptions. It’s another compelling investment for long-term growth. So, again, let’s start off with earnings.

Even with the pandemic subsiding, Costco has maintained steady comparable-store sales growth, a key metric in retail, exceeding 8% in early 2024. Therefore, the company’s core business model clearly remains strong.

Plus, an insanely high 92% of Costco members renew their memberships, demonstrating high customer satisfaction and loyalty, leading to predictable revenue streams. And that looks like it might just be climbing higher.

Costco stock is actively expanding its global footprint, opening new warehouses at a steady pace, which increases its customer reach and potential sales. Their business model thrives on offering a curated selection of discounted everyday items alongside surprise deals, keeping customers engaged and returning for more. This fosters brand loyalty and repeat business.

And as mentioned, even during inflationary periods, Costco’s membership model with bulk discounts becomes even more attractive to value-conscious shoppers, potentially driving up sales. So, while the company may trade at a premium valuation, it still offers long-term investors growth.

Bottom line

So, which stock is the better buy? Of course, it’s going to come down to your priorities. Costco stock might be better if you want consistent growth, with customer loyalty thanks to high membership renewal rates. It also has a strong brand, with customers choosing the company again and again, even during downturns.

Walmart stock, however, might be better for those seeking a lower valuation and dividend income. Furthermore, it’s providing more growth in the e-commerce space. Overall, both look like great options on the market today. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has positions in Walmart. The Motley Fool recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.

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