Walmart(NYSE: WMT) might not be the first stock you think of when considering what companies turned their shareholders into millionaires. But that's precisely what it has done.
In the last 30 years, this top retail stock has produced a total return of 2,160%, which would have turned an initial capital outlay of $45,000 into just over $1 million today. That's a solid performance that would please most investors.
But can Walmart help you become a millionaire from this point on? Let's take a closer look at the world's biggest retailer.
Latest trends
Over the last couple of years, we've had challenging economic conditions. Higher interest rates, ongoing inflationary pressures, and fears of a possible recession are worries for most businesses. But Walmart continues humming along.
With its focus on low prices, the company has posted solid financial results in recent times. Revenue increased 6.7% in fiscal 2023 and 6% in fiscal 2024 (ended Jan. 31), both much higher rates of growth than Walmart investors have been accustomed to over the past decade. And in the latest fiscal quarter (Q4 2024), the business easily exceeded Wall Street estimates with its revenue and diluted earnings per share (EPS).
Consumers might be tightening their budgets, but Walmart continues showing strength in certain areas such as grocery and e-commerce. The company's durability should give shareholders confidence, particularly now when there are still recessionary concerns prevalent.
In typical fashion, Walmart raised its dividend in 2024, this time by 9%. Income-seeking investors will appreciate the fact that this was the 51st straight year the payout was raised.
Looking ahead
There's no real serious threat to Walmart's dominance. This business will still be around decades from now. It has maintained its standing despite the rise of e-commerce behemoth Amazon. Walmart has the brand name and the massive scale to continue delivering for customers.
But investors should wonder how much growth this business has left in the tank. To be fair, Walmart opened 126 new stores last year. Its global ad revenue surged 33% in Q4. And memberships at its Sam's Clubs warehouses are at record levels.
Furthermore, the leadership team is focused on building a true omnichannel retail enterprise. This means focused investments to bolster the supply chain and digital capabilities to better serve customers. These initiatives should help make Walmart even more formidable in the competitive retail sector.
However, I'm not convinced the company's growth trajectory is going to pick up from historical trends. In the past 10 years, the company's net sales increased at a compound annual rate of just 3.1%, with diluted EPS rising at a 1.7% annualized pace. That track record is not exactly the recipe for a millionaire-making stock.
Return potential
With a current market cap of nearly $500 billion and fiscal 2024 sales of $648 billion, it's perfectly reasonable to assume that Walmart's future investment returns won't even come close to resembling those of the past. This is a very mature enterprise today.
An added consideration is Walmart's valuation. Shares trade at a price-to-earnings (P/E) ratio of 31.3 right now. That's in line with its trailing-five-year average and a notable premium to its trailing-10-year average. In other words, the stock looks richly valued.
Combine muted growth potential with a high P/E multiple and you can clearly see the possibility of subpar returns moving forward. If investors are looking at Walmart to make them millionaires, I suggest they seriously temper expectations. The odds are low that this stock can make that happen.
Should you invest $1,000 in Walmart right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neil Patel and his clients have 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.
