Mindset for Money
CPA, Financial Analyst, Former Big Four Auditor
Costco is very overvalued, while Nvidia is undervalued. Per @charliebilello, Costco trades at 45 times forward earnings, Walmart at 36 and Nvidia at 17. A high multiple can be justified for growth companies like Nvidia, but not for Costco and definitely not for Walmart. x.com x.comÂ
Walmart and Costco are very overvalued while Nvidia is undervalued: per Charlie Bilello, Costco trades at 45x forward earnings, Walmart at 36x and Nvidia at 17x. A high multiple can be justified for a growth company like Nvidia, but not for Costco and definitely not for Walmart. x.com x.comÂ
Costco is the preferred hedge against OpenAI's much higher valuation relative to revenue. Costco's cited $441B valuation comes with $275B revenue, versus OpenAI's $1.4T valuation and $50B revenue. x.comÂ
Walmart is expensive at 40 times forward earnings on a 3% net margin. That is nearly double Nvidia's 21 times, even though Nvidia earns a 63% margin. x.comÂ
Costco and Walmart's valuations have diverged from most US food and beverage stocks. Most of the group trades near 20-year valuation lows, while these two have entered a mini-bubble. x.comÂ
Walmart has the strongest fundamentals in retail, with $725B+ of revenue, exploding e-commerce and market-share gains while rivals bleed. It is a defensive cash-printing machine in a shaky economy, and analysts rate it a moderate buy with $140+ targets. x.comÂ
Walmart's 43.28x earnings multiple makes the stock impossible to buy for a long time. Its historical median is 31.13x, and even at 30x it would not be attractive. x.comÂ
Walmart's valuation is too high for a grocery and household retailer. At about 36 times next year's earnings, it exceeds its five-year norm of 25 and the roughly 20 times this business should command; Target trades near 16 times. Stay away from Walmart here. x.comÂ
Walmart may be setting up for a big bounce, with its pullback matching the pattern of its last two bottoms. The stock is down about 25% from its all-time high, as it was before both prior bottoms, which also showed RSI divergence. Its forward P/E has fallen from near 40 earlier this year to a more respectable 31, and it is holding just above the psychological $100 level near a prior breakout area. x.comÂ
Costco's premium multiple looks unsustainable, at 40 times next-twelve-month earnings with EPS growing only about 10%. Stocks with PEG ratios like that are not worth owning, as multiple cuts at former compounders such as FICO and Intuitive Surgical showed. x.com x.comÂ