Like Walmart Stock? This Retailer May Be an Even Better Buy Right Now

Walmart (NASDAQ: WMT) is a solid stock to invest in, as its business is diverse and robust. The company is able to generate steady growth, regardless of economic conditions, as its big-box stores offer something for everyone. In the past five years, shares of Walmart have risen by around 190%.

However, amid those impressive gains, its stock has reached elevated levels. Buying a stock that trades at a high premium comes with risk, regardless of how good the business may appear to be. And so while Walmart may be a quality long-term stock to own, there's one stock that may be an even better buy right now, and that's Ross Stores (NASDAQ: ROST).

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Ross Stores delivers strong growth in Q4

Retail company Ross Stores released its fourth-quarter numbers last week, which exceeded its guidance. The business had a terrific quarter for the holiday season with sales for the three-month period ending Jan. 31 totaling $6.6 billion, rising by 12% year over year. The company's comparable store sales rose by 9%. The comparable number is key as it only factors in stores that were open a year ago, and thus, excludes the effect of stores being closed and opened within that time frame.

It was a terrific performance for the company that enabled it to generate a per-share profit of $2.00, which was well above its guidance range of $1.77 to $1.85. Ross Stores says it is seeing a "strong start" for the current quarter and projects its comparable store sales to be up between 7% and 8%. It is a bit more modest in its full-year growth, however, projecting just 3% to 4% same-store growth over the 12-month period.

Why Ross Stores looks like an underrated buy today

Ross Stores' stock spiked on the strong earnings numbers, and it's now up around 18% for the year. It's currently trading at 33 times its trailing earnings, which may be a bit high, but that's well below the 45 times earnings that Walmart trades at.

While Walmart offers a more diversified shopping option, Ross can appeal to shoppers who are looking for a budget-friendly bargain-hunting experience. And at a time when economic conditions are proving to be challenging, Ross Stores could be in a great position to do better than other retailers, as consumers are clearly seeing a lot of value in its stores these days.

If you're a long-term investor, it's hard to go wrong with Walmart or Ross Stores, as both have great underlying businesses. But with a more attractive valuation and potentially greater growth potential ahead, Ross Stores may be the better of the two retail stocks to buy today.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.