Walmart Surpasses Amazon in EBITDA Multiple Amid $1T Valuation

Walmart Inc.’s been the biggest kid on the retail playground for decades. 

So when its market capitalization — the combined value of all of its outstanding shares — topped $1 trillion last week, it was a brick-and-mortar breakthrough, but also confirmation of what everybody knows. 

What’s more surprising is that Walmart, right now, is packing more investment bang for its buck than its online rival Amazon, which is still winning on market cap. 

It takes a little math to suss it all out.

Apple became the world’s first trillion-dollar company in 2018 and now there are a dozen companies in the 13-digit club on Wall Street, including Nvidia ($4.6 trillion), Google-parent Alphabet ($3.9 trillion) and Amazon ($2.2 trillion).

While market cap is a key data point to watch, it’s probably not the most important one. 

To get a sense of not just how big a company is on Wall Street, but how strongly it resonates with investors, one has to look at a multiple of earnings. 

The standard is enterprise value-to-EBITDA — the value of all a company’s stock and debt divided by its annual earnings before interest, taxes, depreciation and amortization. 

That measures just how much investors are willing to pump into a business, either through debt or equity, for every dollar of EBITDA.

For Walmart, where investors invested about $23.60 for every dollar of EBITDA, its enterprise multiple is 23.6-times. 

It doesn’t zing the way a trillion does in a headline, but it’s a big number. 

Amazon, for instance, has an EBITDA multiple of 14.2-times — near the top of the range for most fashion companies, even the strongest ones. Tapestry Inc. trades at 14.3-times, just ahead of LVMH Moët Hennessy Louis Vuitton’s 12.2-times. The outlier is Nike Inc., trading at 19.4-times.

Much more common in retail these days is an EV/EBITDA multiple in the midsingle digits, like Macy’s Inc. and Kohl’s Corp., which both trade at 5.9-times.

Walmart is trading closer to Google-parent Alphabet, which sits at 24.8 times.

The retailer is getting such a sweet multiple largely because of the growth prospects ginned up by former chief executive officer Doug McMillon’s willingness to jump into new businesses — like online advertising, the third-party marketplace and fast delivery.

In each case, the retailer took a page out of Amazon’s playbook and, so far, is running the play well. 

Walmart looks much more like Amazon today and, increasingly, the two are being looked at together.

To wit, a report from Moody’s Investors Service on Tuesday said, “We project that [earnings before interest and taxes] for the sector excluding Walmart and Amazon will fall by 1 percent to 3 percent in 2026.”

And both Walmart and Amazon have the means to keep investing in AI — and hold on as the world keeps turning all the faster. 

“New AI-related applications are fueling innovation that is critical for sales and profit growth,” Moody’s said of retail. “Amazon and Walmart are working to personalize the online shopping experience, and along with other top large retailers, are using predictive tools to speed up deliveries, offer customers greater convenience and lower costs….The gap will widen between thriving, surviving and at-risk retail and apparel companies as technological change continues to disrupt business models.”

In the “thrivers” category, Moody’s pointed to Walmart, Amazon and Home Depot, which all have super scale, and also singled out TJX Cos. Inc., Dick’s Sporting Goods Inc. and Authentic Brands Group as having unique business models. 

The “survivors” category included Target Corp. and was characterized by the need to “continually improve execution and customer reach to stem market-share losses to larger rivals.”

“The most levered [or highly indebted] retailers are at a disadvantage,” Moody’s said. 

Nothing new there. 

Retail is a game Walmart knows well and, in many ways, has already won. Now it’s going after a new game — whatever it is that Amazon’s playing — and investors expect it to make a good showing of itself. 

The Bottom Line is a business analysis column written by Evan Clark, deputy managing editor, who has covered the fashion industry since 2000.