Shares of big-box retailer Walmart (NYSE:WMT) have been soaring since the company released its latest earnings numbers earlier this month. Walmart beat Wall Street's expectations for both revenue and earnings, proving to be more resilient than other retailers amid inflation. Grocery sales make up a big part of the company's revenue and that makes Walmart a bit of a safer buy. Its comparable U.S. sales were up an impressive 8.2%.
Investors have been buying up shares of Walmart in light of the strong earnings report, but with its valuation now nearing its 52-week high, it may be worth asking the question of whether the stock is too expensive. It's trading at 47 times its trailing profits. And even on a forward-earnings basis, that multiple remains high at 23. By comparison, the average stock on the S&P 500 trades at 19 times earnings and 18 times future profits.
While Walmart's recent results are encouraging, investors should be careful not to assume they will continue. Discount retailers and dollar stores could potentially chip away at some of the big-box retailer's sales, especially if inflation continues to be a problem, forcing consumers to be even more selective in their purchases.
At its current share price, Walmart is too expensive of a buy and there's a danger that it could be due for a drop if future quarters don't prove to be nearly as strong.
With the recent bump up in share price, Walmart's stock is now up just under 6% since the start of the year.
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