When looking for stocks to buy, it’s impossible to overlook big name businesses everyone believes is taking over the world. From companies you see everywhere in the world (like the Starbucks locations you pass by while traveling in Europe) to the businesses which seemed to implode with success overnight (like social media giant Facebook), when making a large investment, it’s natural to want to make the “best” decision (or, let’s face it, gamble) possible.
When it comes to retail giants Amazon.com (NASDAQ:AMZN) and Walmart (NYSE:WMT), which one will come out on top? When looking for an item online, shoppers are likely to flood Amazon with search inquiries whereas, when it comes to accessibility, variety, and affordability in one’s actual neighborhood, Walmart is the place to find virtually everyone.
Looking for stocks to buy means looking for quality business practices and leadership alongside actual financial success: How Do Amazon and Walmart measure up?
If you add up the revenue of both retail stores, you’re looking at $700 billion annually. Let your head stop spinning before you read the next number… they make up for more than $1.1 trillion in shareholder wealth. How about their annual operating profits? More than $25 billion.
When it comes to their relevant markets, these are the brands to beat. So, what happens when you put them in the ring together to compete? Which stock is truly the best buy?
When assessing which retail outlet is the best stock to buy now, look a little more deeply at your options.
When the very first Walmart opened on July 2, 1962, it was founded on the most unshakable and successful business model there is – having the lowest prices in town. Whatever random thing a person needs at a random moment, chances are not exactly bad Walmart will rank high on the list of places to go to find it cheaper than anywhere else. The capability of Walmart to scale product is mind-boggling and its distribution system is what makes those competitively low prices a possibility for its enormous customer base. Who could have known Sam Walton’s convenience store in Rogers, Arkansas would one day become a national retail giant known the world over?
It would take an impressive business strategy to overcome what Walmart has established… and, yet, Amazon was up for the challenge. The business strategy is essentially the same but evolved to reach people where they prefer to shop these days: online. Amazon has a global fulfillment network which breaks down the barriers of what people once felt limited to buy in this country alone. With such a far reach, Amazon, often times, may offer a price even lower than Walmart’s for the same item. Amazon’s e-commerce model offers the advantage of expanding to third-party merchants enabling them to offer the greatest variety of products.
When it comes to options, Amazon is likely to win as a stock to buy when in the ring with Walmart.
The internet makes for endless possibilities for Amazon and their Prime Membership program for customers (1 million members strong) who do not want to wait standard shipping times to receive their goods. This program greatly helps to secure loyal return business, the best kind of business.
Beyond retail, Amazon is in the cloud business. The Amazon Web Services (AWS) cloud-computing infrastructure dominates the entire field worldwide. Amazon takes the lead in providers who offer the most products when it comes to smart devices (in particular, speakers). This business has taken off more than anyone could have reasonably anticipated. Smart-home technology is rapidly taking over both urban and rural America and Amazon is already well ahead of the crowd. With all this success, the advertising budget is the proverbial “no big deal” and with the power of internet, Amazon is unstoppable when it comes to ancillary businesses wanting to sell through the internet market king. Really, it’s a win-win for Amazon, third-party businesses, and shareholders.
Options definitely put Amazon in the lead, but, what about the actual numbers? What about monetary prowess?
Which company has the best stock to buy when it comes to financial strength?
If one were to look at paper alone, Amazon reigns with $17 billion more in cash stores with Walmart trailing behind at $7.89 billion. That’s nothing to sniff at for sure, but, Walmart generates 2.5 times more income, four times the operating profits, and 55% more functional cash flow than its competitor, Amazon. Revenue? Amazon weighs in at $193.19 billion. Walmart? $500.34 billion!
When it comes to debt, the businesses are in comparable, nominally varying amounts with Amazon sitting on $44.49 billion and Walmart handling $46.61 billion.
What about business growth? If choosing between Walmart and Amazon stocks to buy, who is in the best position to grow?
Walmart was gaining on Amazon when it came to cash flow, but, no one is likely in a better position to grow as much and as quickly as Amazon.
Amazon anticipates 33.5% growth in 2018. Wall Street is inclined to agree with reports of earnings per share expected to expand 27% each year over another five years. Its business platform is quite simply the most fertile ground for e-commerce anyone will find.
Walmart is largely still a brick and mortar setup pouring resources at their online presence just to get by, but not quite financially impressive enough to leap over the same obstacles as Amazon. Walmart is only expected to increase sales by 3% annually. There are several analysts in agreement regarding the Walmart EPS rise to reach only 6.5% each year for the next 10 years.
While it looks as though Amazon is back in the lead for this race, there’s one more hurdle to consider…
Which price tag might win over investors seeking stocks to buy?
The one price Amazon couldn’t seem to beat was the share price for stock.
Amazon stock is still considerably pricier than Walmart’s. Considering the high growth projections, this is to be expected, but, how did these two titans of commerce get to where they are today? They both have done so by stocking a mind-blowing variety of goods and prices!
When one measures price-to-sales, price-to-free-cash-flow, and the almighty PEG, Amazon might be too rich for some investors’ taste. Walmart’s price, as it tends to be out on the street, is undeniably lower.
So, which stock wins in the battle of best stock to buy? Depends on an investor’s style…
Investors who are more inclined towards growth stocks will want to choose Amazon whereas investors who like value will favor Walmart’s ability to lead when it comes to generating cash flow and the lower share price.
However, it’s not possible to call either of these a bad bet. These companies have made it to the championship and they both have what it takes to go the distance for long-term investments.
To learn more about big name stock options, read How Netflix Stock Fell and Still Remains Ahead of the Competition.