Walmart Stock Has Been a Big Winner Recently. But Is It Overvalued Now?

Shares of Walmart (NASDAQ: WMT) have surged over the past year, rising more than 30% as of this writing. This return nearly doubled the S&P 500's gain over the same period. It makes sense that shares are up, but should they have risen as much as they have?

No doubt the underlying business has performed well recently, particularly considering Walmart's growth has occurred in the face of an uncertain macroeconomic environment. The supermarket retailer specialist's progress during a period like this, therefore, demonstrates Walmart's resilience. But with a price-to-earnings ratio in the forties, valuation risk is becoming a real concern.

Is Walmart stock overvalued? Let's take a look.

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How Walmart has impressed

Perhaps the biggest reason the retailer's stock has appreciated so much over the last year is that, in addition to demonstrating strong performance in its core business, its growth has been picking up speed recently, benefiting from newer revenue streams like e-commerce and advertising.

In its third quarter of fiscal 2026, for instance, Walmart reported revenue growth of 5.8% year over year -- an acceleration from 4.8% in the prior quarter. But the more exciting story is what is happening underneath the surface. Walmart's fiscal third-quarter global e-commerce sales grew 27% year over year. And Walmart's global advertising business grew 53% year over year in the quarter, or 33% when excluding the impact of incremental sales from its acquisition of Vizio in December of 2024.

The company also called out 17% year-over-year growth in membership income, helped by a double-digit year-over-year growth rate in Walmart+ membership income in the U.S. and a 34% increase in membership income internationally (led primarily by growth in Sam's Club membership income in China).

"Across all income cohorts, we saw membership income growth accelerate with overall Q3 net adds our strongest on record, supported by new benefits like our One Pay Cash Rewards credit card and expanded streaming services," said Walmart chief financial officer John Rainey during the company's fiscal third-quarter earnings call.

Valuation risk

Still, is the stock really worth its steep valuation? Not only does Walmart have a high price-to-earnings ratio of 42, but its forward price-to-earnings ratio, which measures the stock's valuation as a multiple of analysts' consensus forecast for earnings over the next 12 months, stands at 39. Additionally, it's worth noting that this valuation is even higher than faster-growing tech companies like Meta Platforms and Alphabet, which have forward price-to-earnings ratios of 21 and 30, respectively.

And one unfortunate byproduct of a high valuation is that it suppresses Walmart's dividend yield. The stock's annualized cash payout as a percent of its stock price currently sits at 0.8%, hardly helping the stock's return profile.

So, for Walmart stock, debating whether it's overvalued is less about whether it is a great company and more about whether today's price has simply appreciated too much, too fast. Unfortunately, I think it has.

Sure, Walmart has genuine strengths that deserve a valuation premium, including its ability to continue growing even in an uncertain macroeconomic environment. Additionally, the company's economies of scale is hard to match. And its push into faster delivery, digital sales, and advertising is giving investors good reason to believe that Walmart can sustain its robust growth rates over the long haul.

But with a price-to-earnings ratio in the forties, shares could take a big hit if there's any sign of weakness in the company itself or the economy. I believe that, if this happens, this would be the time for investors to make their move and buy a stake in the company. So, patience is probably the best move; the valuation risk is simply too great to buy shares now, following their 30% move higher over the past 12 months.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Walmart. The Motley Fool has a disclosure policy.