This Retail Giant Is Trading for Half the Price of Walmart and Nearly One-Third the Price of Costco, but Growing 3 Times as Fast
Walmart (NASDAQ: WMT) and Costco (NASDAQ: COST) have started 2026 by building on their strong results of the last few years. Costco shares are up more than 9%, and Walmart is up more than 12% year to date, while the S&P 500 is down for the year. Both companies have benefited from strong financial results…
Walmart(NASDAQ: WMT) and Costco(NASDAQ: COST) have started 2026 by building on their strong results of the last few years. Costco shares are up more than 9%, and Walmart is up more than 12% year to date, while the S&P 500 is down for the year.
Both companies have benefited from strong financial results driven by their e-commerce operations and by a macroeconomic environment that has driven consumers to seek value.
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While Walmart and Costco might offer great values for their shoppers, investors might not see as much value in their stocks. The market may have gotten ahead of the retailers’ financial performance over the past few years, bidding up their stock prices and increasing their valuations.
But investors looking for value in the retail segment may have an opportunity from an unexpected candidate. Its stock currently trades at a much lower valuation than either Walmart or Costco.
Image source: Getty Images.
As mentioned, both Walmart and Costco are seeing very positive results from their e-commerce operations. Walmart saw U.S. e-commerce sales climb 27% last quarter, marking its eighth straight quarter of growth above 20%. Costco’s e-commerce sales climbed 22.6% last quarter. Walmart has also expanded its advertising business, adding more retail media and video content through its Vizio acquisition. Walmart’s U.S. digital advertising sales climbed 41% last quarter.
Despite their progress in e-commerce, though, both Walmart and Costco are failing to take market share from Amazon(NASDAQ: AMZN), which continues to hold a dominant position. Amazon’s e-commerce market share expanded from 34.4% in 2024 to 35.7% in 2025, according to research from Marketplace Pulse. While online store sales, third-party seller services, and subscription services all grew more slowly on a percentage basis than Walmart and Costco’s e-commerce operations, Amazon is working off such a massive base that even its relatively modest growth has a huge impact on the market.
Importantly, Amazon’s retail operations are primarily digital, whereas Walmart and Costco still derive the majority of their revenue from their physical stores. As such, Walmart and Costco’s overall revenue growth of 5.6% and 7.4%, respectively, in their most recently reported quarters, is still below the 10% growth Amazon exhibited in the fourth quarter. And while both are seeing operating margin improvements, so too is Amazon.
As such, it’s somewhat curious that Amazon trades for an enterprise value that’s just 10.8 times analysts’ expectations for its 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA). Meanwhile, investors give Walmart a multiple above 21 and Costco a multiple of nearly 30.
Amazon’s retail business continues to grow its top and bottom lines faster than Walmart’s or Costco’s. In fact, analysts expect Amazon’s EBITDA to climb 40% this year and another 23% in 2027. Growth expectations for Walmart and Costco are just 10% and 8% per year, respectively, over the next two years.
There’s a clear explanation for investors’ reluctance to bid up the price of Amazon: its massive cloud computing business, Amazon Web Services (AWS). Indeed, AWS accounted for the majority of Amazon’s operating income in 2025, generating $45.6 billion of Amazon’s $80 billion in total income from operations. As such, investor sentiment about the cloud business is going to have an outsize impact on the company’s overall valuation.
Management surprised analysts in January when it announced plans to spend more than $200 billion in capital expenditures this year, mostly to build out compute capacity for AWS. Management continued to reiterate several positive signals for its cloud computing business, including the fact that it remains supply-constrained.
Accelerating its investments in AWS can help it capitalize on market opportunities right now. “We have deep experience understanding demand signals in the AWS business and then turning that capacity into a strong return on invested capital. We are confident this will be the case here as well,” CEO Andy Jassy explained on Amazon’s fourth-quarter earnings call.
The step up in spending will likely push Amazon’s free cash flow into negative territory in 2026. For a company that’s often held up free cash flow as the most important metric over the long run, that increases the uncertainty about the business, which also depresses the earnings multiple investors are willing to pay. It also means depreciation will increase, a real expense that investors won’t find in EBITDA, which should, in turn, result in a lower EBITDA multiple.
Perhaps looking at earnings per share is a better judge of value. There, the gap isn’t quite as pronounced, but Amazon still trades at a significant discount. Investors are currently paying just 27 times analysts’ earnings estimates for Amazon, where Walmart and Costco trade for 42 and 48 times forward earnings, respectively.
As such, investors appear to be significantly undervaluing Amazon due to low expectations for its return on invested capital for its cloud computing business. Long-term investors are either getting a deal on the cloud computing business or the retail business relative to Walmart and Costco. Either way, it looks like a fantastic buying opportunity.
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Adam Levy has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.
This Retail Giant Is Trading for Half the Price of Walmart and Nearly One-Third the Price of Costco, but Growing 3 Times as Fast was originally published by The Motley Fool
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