Costco (COST) is one of those rare companies that seems to do almost everything right. It runs on razor-thin margins yet consistently grows. It keeps prices low for shoppers but still finds ways to reward shareholders. It thrives in both physical stores and online. But with some key insiders selling shares and the stock trading at sky-high valuations, is it still a smart investment?
Insider Selling Raises Eyebrows
James C. Klauer, Costco’s Executive Vice President, recently sold 4,000 shares for around $3.92 million. That’s a lot of money, but Klauer still holds nearly 44,000 shares, so he hasn’t exactly bailed out. Still, he’s not alone; Costco insiders have sold a total of $9.9 million worth of stock in the past three months.
TipRanks’ Insider Trading Tool currently shows “Very Negative” insider sentiment for Costco. While insider selling doesn’t always mean trouble ahead, it could just be smart financial planning; it’s worth noting, especially when several insiders do it at once.
The Business Is Booming
Despite the insider moves, Costco’s business fundamentals look rock-solid. In March 2025, net sales jumped 8.6% to $25.51 billion. Comparable sales were up across the board: 7.5% in the U.S., 4.1% in Canada, and 2.9% internationally. Even more impressive? E-commerce sales surged over 16%.
In addition, Costco just raised its quarterly dividend by 12% to $1.30 per share. That’s part of a long-standing pattern—the company has increased its dividend for 20 straight years. It also occasionally pays out massive special dividends, like the $15 one paid out in early 2024. That speaks to a healthy cash position and strong ongoing performance.
A Model Built for Loyalty
Costco’s low-margin, high-volume strategy may not sound exciting, but it works incredibly well. Its 3.7% operating margin is much lower than the industry average—but that’s by design. The real profits come from membership fees, which comprise a big portion of Costco’s earnings and have renewal rates over 90%.
This model creates a steady flywheel: low prices attract loyal customers who pay membership fees, which in turn help Costco keep prices low. It’s a recurring revenue engine outside the tech world.
What About Valuation?
Costco currently trades at about 54 times forward earnings, which is high even by tech stock standards. That gives it a PEG ratio of 6x, suggesting the stock may be expensive relative to its expected growth. Its earnings yield is just 2.2%, lower than the U.S. 10-year Treasury yield of 4.3%.
So while the business is great, the stock may already be priced for perfection. Any small hiccup, like tariffs or slower growth, could hit the stock hard.
A Proven Company, But…
Costco remains a fantastic company with a proven, resilient business model. But at today’s prices, the stock may not offer the same bang for your buck. Investors should weigh the insider selling, rich valuation, and broader market risks before loading up on shares. For now, Costco looks like a solid “Hold.”
Is COST Stock a Buy?
Costco sports a Moderate Buy rating, with an average price target for COST stock at $1,086.58. This represents a 9.53% upside potential.
