I’ll review why Walmart, the largest retailer in the world, has stumbled and why the stock may continue to come under pressure. I’ll give an options trade that wins if the stock continues to struggle. In the past 45 years, Walmart has posted only one modest year-over-year sequential sales decline of -0.7% in FY2016. The company ranks in the top 3% of the S & P 500 regarding trailing 12-month free cash flow, which is expected to grow an impressive 15% YoY between FY2025 and FY2026. The street expects net income margins to expand in the next two fiscal years. One of the reasons that Walmart has continued to grow, even as many retailers have struggled in the past several years, is evolution. They’ve maintained their mission to be a one-stop shop by adding groceries that bring consumers back regularly. The company has continued to build its e-commerce business. In addition to expanding in these areas, Walmart has continued to focus on the operations of its legacy business by continuously improving cost and inventory management. Continuous evolution and improvement helped the company deliver a modest earnings beat when they reported on February 20th, the 11th consecutive quarter the company reported earnings that beat the street’s estimates. In fact, through the 19th, the day before their quarterly earnings release, Walmart’s share price was in the top 20% of Russell 1000 companies year-to-date. However, after the company reported, the share price fell by 6.3% and another 2.5% on Friday. The reason was disappointing sales guidance. The Street had been hoping for 5% annual sales growth, but the company guidance suggested that it would likely be between 3-4%, barely above the inflation rate. When asked about Walmart on Fast Money Friday night, I mentioned that it “perplexed me.” Not that the company would grow only marginally faster than inflation – an expectation similar to the pace of growth anticipated for GDP. I believe in everything I said about the company’s multi-decade operating performance. One might wonder why I’m not a buyer after the stock’s nearly 9% decline over the past two trading days, and the answer is, as it should usually be, valuation. Valuation concerns It is insufficient for a company to be well-operated or even “best of breed” to make a compelling investment. It must offer growth at a reasonable price, which is relative. A slower-growing company is reasonably expected to trade at valuation multiples lower than faster-growing ones. All else equal, steady growth will trade at a premium to more volatile operating performance. If one compares Walmart to Costco, Costco has grown its top and bottom lines faster over the past five years. Note that I have normalized sales and profits to $100 in these charts so one can easily discern the relative growth rates. And, as a result, Costco has maintained a higher price-to-forward earnings multiple: Observing these three charts, we see two companies that have experienced solid growth, with the faster-growing business trading at a deserved premium over the slower-growing one. One might believe that either would be a satisfactory investment. However, comparing two companies to one another is like comparing the size and growth of two trees in the forest. They may look reasonable compared with one another, but comparing them to the development of all trees might change one’s perspective. Such is the case here. Consider S & P 500 overall figures over the same period. The market’s revenues have grown more than 40% — not quite as fast as Costco’s, but faster than Walmart’s. Earnings have grown more than 50%. Again, not as much as Costco’s, but more than Walmart’s. The trade A 38% premium to purchase Walmart shares, which have experienced earnings growth of 7% compounded over the past five years versus an 8.3% CAGR for the S & P more broadly, would only be justified if one believed Walmart would materially outperform the S & P earnings growth in the coming years. Perhaps one thinks the S & P’s earnings are at greater risk due to the tech sector or that Walmart’s growth will suddenly accelerate, but I would ask investors to consider some things first. Walmart has meaningful competition online from Amazon, which is growing faster and will likely overtake Walmart’s revenues soon. In the grocery space, Costco has been growing more rapidly (not enough to justify Costco’s huge multiple, but that’s another matter). If the stock were trees, Walmart would be one of the largest in the forest. However, the increase in the number of board feet of usable lumber has not grown as quickly recently. So, if asked whether I want a share of that tree to be harvested five years from now or a share of all trees for a similar time frame, I’d prefer a share of the forest rather than the tree. If you own the shares, selling covered calls at this point, even after the recent decline, makes sense to give yourself a little extra yield in the form of an options premium. Sell Apr. 4 WMT $100 call For those inclined to lean into the stock’s weakness and make an outright bearish (short) bet, one might consider a debit put spread such as the very slightly-in-the-money April 95/87.5 example provided below. Buy Apr. 17 WMT $95 put Sell Apr. 17 WMT $87.50 put DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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