Walmart Inc. (NASDAQ:WMT) and Costco Wholesale Corporation (NASDAQ:COST) compete for household spending through different models. Walmart combines stores, delivery, marketplaces and advertising. Costco relies on low merchandise markups and a paid membership relationship. Both can be resilient without being inexpensive.
Trailing earnings cost investors about 39 times for Walmart and 45 times for Costco at the October 7 close. On trailing free cash flow, that order reversed: Walmart cost about 64 times and Costco 44 times. The reversal makes investment spending central to the stock choice.
WMT ranks fourth on our list of 10 Best Bear Market Stocks to Invest In Right Now. See which three stocks attracted more hedge funds and generated higher free cash flow than Walmart.
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Our Walmart analysis examines how faster delivery and cross-border access expand the retailer’s online opportunity. The broader e-commerce screen shows how Walmart’s fulfillment model differs from Costco’s growing digital channel.
Walmart’s expansion has a visible cash bill
Walmart’s fiscal second-quarter revenue increased 5.9% to $187.9 billion. Global e-commerce sales grew 23%, advertising grew 38%, and membership fee revenue increased 17%. Its bull case is that a large retail network can support higher-value services while making delivery more convenient.
The spending required to build that proposition is already visible. First-half operating cash flow rose to $19.71 billion from $18.35 billion, but equipment spending increased to $14.18 billion from $11.41 billion. Free cash flow consequently fell to $5.53 billion from $6.94 billion.
The decline is not showing waste, what it does expose is expansion costs obscured by the earnings multiple. Walmart also reported tariff-refund benefits in operating-income growth, so the headline increase should not all be treated as an enduring operating improvement.
Walmart had 111 holders in Insider Monkey’s Q2 2026 data, up from 99 in Q1. Fisher increased shares about 2%.
Costco’s fiscal fourth-quarter sales rose 11.2% to $93.9 billion. Annual membership fees increased about 11% to $5.91 billion. Membership reinforces purchasing scale and repeat visits.
The bear case is its already high earnings price and thin merchandise economics. Membership revenue should not be equated with pure company profit; the retailer still has employees, warehouses and operating costs. Its fourth quarter covered 16 weeks, unlike Walmart’s quarter, so their revenue levels are not a like-for-like quarterly comparison.
Costco had 104 holders, down from 107 in Q1, while Fisher increased shares about 2%.
Costco needs less of a cash acceleration
Trailing operating cash flow less capital spending was about $13.51 billion for Walmart and $9.38 billion for Costco, ending in July and August 2026, respectively. Costco’s figure uses the October 7 annual filing. At fixed October 7 equity values, Walmart needs about $19.28 billion annually to match Costco’s 44.5 times cash multiple, 43% above its trailing amount.
That is a hurdle — Walmart could earn it if investments produce more profitable sales without another equivalent spending increase. Costco could lose its advantage if weaker membership economics or heavier investment depress cash conversion.
A defensive business also needs a valuation test. Our bear-market screen explains which financial filters Walmart clears and why those filters do not establish that its shares are cheap.
Costco’s September 15 short interest was 7.36 million shares, 1.7% of float.
Costco gets the edge on current cash economics despite its higher earnings multiple. Walmart becomes preferable if omnichannel investment lifts sustainable cash toward that hurdle.
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