Forget Walmart. The Grocer Beating It on Trust and Margin Trades at a Third of the Multiple

Walmart (NYSE:WMT | WMT Price Prediction) is the grocery story everyone wants to own right now, with a $1.047 trillion market cap and a stock that has climbed 34.53% over the past year. But here’s what you should actually be watching.

The Walmart Trade Has Gotten Ahead of the Story

The pitch you keep hearing is that Walmart is winning groceries. Fine. The problem is that the multiple you are paying has almost nothing to do with the groceries. At a trailing P/E near 48 and a price to free cash flow of 70, The market is valuing this like an advertising and eCommerce growth platform, which is exactly the narrative management is selling. Advertising revenue grew 37% to $6.4 billion, eCommerce jumped 24%, and the VIZIO integration gives the story a tech sheen. That is the multiple expansion engine, not the milk and eggs.

Strip away the hype and what you actually own is a company where Q4 net income fell 19.36% year over year to $4.24 billion even as revenue grew, where net profit margin sits at 3.07%, and where management guided FY27 adjusted EPS of just $2.75 to $2.85. Even Benzinga flagged that Walmart now trades richer than the S&P 500 and even NVIDIA (NASDAQ:NVDA), with a double-top forming on the chart. Retirement money chasing that setup is the definition of being in the crowd, not ahead of it.

Kroger Is the Trade Walmart Pretends to Be

If you believe inflation is going to stay sticky and shoppers will keep trading down, the cleanest way to own that is Kroger (NYSE:KR), a $40.7 billion pure-play grocer the market keeps treating like an afterthought. Three reasons it belongs on your radar.

First, private label is actually working. Kroger’s Our Brands portfolio drove gross margin to 23.1% from 22.7% last quarter, with sourcing gains and lower shrink doing exactly what private label is supposed to do in a trade-down cycle. BrandSpark and Newsweek named Kroger the most-trusted Midwest supermarket in 2026, ahead of Walmart. Trust plus margin is a powerful combination when families are squeezed.

Second, the valuation is on a different planet. Kroger trades at a forward P/E of 13 against Walmart’s 44. You also get a 2.06% dividend yield, a fresh $2 billion buyback authorized in December 2025, and FY26 adjusted free cash flow guidance of $2.7 to $2.9 billion. No one is paying you to wait at Walmart’s multiple.

Third, the fundamentals are quietly accelerating. Identical sales went from Q1 +3.2% to Q2 +3.4% to Q3 +2.6%, with Q4 +2.4%, eCommerce has run between 15% and 20% growth all year, and management is guiding to $400 million of eCommerce operating profit improvement and the inflection to digital profitability in 2026. FY26 adjusted EPS guidance of $5.10 to $5.30 implies real earnings growth at a single-digit-teens multiple. New CEO Greg Foran said it plainly: “Kroger delivered a strong finish to the year, with improving market share trends and solid sales growth that reflect meaningful progress strengthening the business.”

The Action

Skip the crowded Walmart trade at 48 times earnings and put Kroger on your research list while the private label margin story and the eCommerce inflection are still hiding in plain sight.