Is Walmart a Millionaire-Maker Stock?

Stock market investors often have to make a trade-off between stability and growth. That's because the fastest-growing companies often have riskier business models, which leads to more volatility. That said, Walmart (NASDAQ: WMT) has recently begun turning this axiom on its head.

Shares in the blue-chip retailer have risen by an impressive 401% over the past 10 years, far outpacing the S&P 500's return of just 251%. And while the company has practically no exposure to glamorous growth opportunities such as generative AI, its massive scale and booming e-commerce business have helped keep its stock relevant.

Let's dig deeper to decide whether Walmart still has millionaire-maker potential.

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The bluest of blue chip stocks

It's hard to think of a more stable and established American business than Walmart. Since its founding in 1962, the big-box retailer has leveraged its immense scale and distribution networks to offer unparalleled selection and low prices to consumers all over the country.

And while investors may be tempted to overlook the grocery business because of its extremely low profit margins, often hovering between 1% and 3%, Walmart makes it attractive by spreading a tiny bit of profit across tens of billions of items, creating a winning recipe that keeps both customers and shareholders coming back for more. The company's business model is also relatively safe because groceries are consumer staple items that tend to maintain demand, even in economic downturns.

Walmart's safety is a big selling point at this time of economic uncertainty related to the war in Iran and rising fuel costs. In March, analysts at Goldman Sachs put the 12-month recession probability at 30%.

But while the bad news seems to dominate the headlines, America's macroeconomic situation remains extremely unpredictable. In March, U.S. payroll jobs data beat expectations, adding 172,000 jobs and bringing the unemployment rate to just 4.3%. The economy therefore appears to be expanding instead of contracting. But Walmart can thrive in either scenario.

What about the growth opportunities?

Because Walmart is a mature company in a highly established industry, investors shouldn't expect it to deliver eye-popping growth. The bigger a business is, the more effort is required to move the needle. And over the long term, most of Walmart's expansion is likely to come from slow, reliable trends such as GDP, population growth, and even inflation. That said, management is taking some successful steps to speed things up a little.

One of the most promising opportunities is in e-commerce, where years of heavy investment are beginning to pay off by creating a business that has become a serious player with a U.S. market share of 9.2%. Walmart's e-commerce segment grew 26% year over year in the first quarter, helping the company's overall top line grow 7.3% to $177.8 billion in the period.

Despite being somewhat late to the party, Walmart already has a massive economic moat in e-commerce because of its logistics network and a web of thousands of brick-and-mortar stores that serve as delivery hubs for nearby communities. The company's membership platform, Walmart+, also helps ensure consumer loyalty through a variety of perks and loss leaders, similar to the strategy Amazon Prime employs.

And while none of these efforts will transform Walmart into a hypergrowth tech stock, they help the company maintain its dominant market share in retail and ensure it doesn't stagnate despite its maturity.

Is Walmart a millionaire-maker stock?

With a forward price-to-earnings (P/E) multiple of 41, Walmart stock is quite expensive compared with the S&P 500 average of 22, so it probably won't make you a millionaire anytime soon. That said, the company deserves a premium because of its quality and safe business. And over the long haul, investors should expect it to continue outperforming the index, especially as growth drivers such as e-commerce continue to scale up.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.