Costco (COST) and Walmart (WMT) are giants of the U.S. retail industry, one known for its lowest prices and the other for its bulk packaging and wide range of deals. You may also have your favorites. Maybe you love the convenience of Walmart, or maybe you love cheap hot dogs when shopping at Costco. Both companies have generated huge profits for investors over the years, but which one is the top stock right now?
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growth
A company's future growth prospects are an important part of evaluating its value as an investment. This may be difficult for the average investor to predict, but companies of this size are typically followed by large numbers of analysts employed by research and investment management firms. Analysts expect Costco to grow at an annualized rate of 9.94% over the five-year period, while analysts expect Walmart to grow at an annualized rate of 7.53% over the same period.
Edge: Costco
dividend yield
Costco and Walmart are both dividend stocks. Dividend yield represents the dividend each company pays to investors, making it easier to compare companies. Dividend yield is calculated by dividing the amount of dividends by the price of one share of stock. Costco's dividend yield is 0.65%, and Walmart's dividend yield is 1.39%.
Edge: Walmart
evaluation
Perhaps the most important factor to consider when evaluating investments is valuation. After all, the price you pay determines your return. Even a great business can be a bad investment if you price it wrong. The most commonly used metric for publicly traded stocks is the price-to-earnings ratio (PER). All else being equal, the lower the ratio, the cheaper the stock price. Costco's latest P/E ratio is 46.45x, while Walmart's P/E ratio is 31.09x.
Edge: Walmart
Winner: WMT
Costco appears to have the best growth prospects, but that alone isn't enough to make it the best investment. Walmart trades at a lower valuation and has a higher dividend yield, so you could receive more in dividends than if you invested the same amount in Costco. This makes Walmart the winner. However, things can change quickly in the stock market, so be sure to reevaluate your investments regularly.
GOBankingRates Details
This article originally appeared on GOBankingRates.com: Costco vs Walmart Stock: Which is a better investment?
