Costco (COST) AI Stock Analysis

• Market Cap: $428.24B
• Dividend Yield: 0.51%
• Average Volume (3M): 2.74M
• Price to Earnings (P/E): 56.3
• Beta (1Y): 0.74
• Revenue Growth: 6.13%
• EPS Growth: 12.14%
• Country: US
• Employees: 333,000
• Sector: Consumer Cyclical
• Sector Strength: 55
• Industry: Discount Stores
• EPS (TTM): 17.13
• Shares Outstanding: 443,683,350
• 10 Day Avg. Volume: 2,858,761
• 30 Day Avg. Volume: 2,738,995
• PEG Ratio: 4.64
• Price to Book (P/B): N/A
• Price to Sales (P/S): 1.56
• Price to Cash Flow (P/CF): 30.90
• P/FCF Ratio: 49.80
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $1,091.43
• Price Target Upside: 13.18% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 26

Costco shows strong financial performance with healthy growth and profitability. The earnings call provided positive insights into future growth through strategic initiatives. However, technical analysis indicates a lack of strong momentum, and valuation metrics suggest the stock may be overvalued. These factors result in a balanced overall score.

Positive Factors

E-commerce Growth

E-commerce sales saw a significant increase, reflecting Costco's successful expansion into online retailing.

Sales Performance

Costco's March US core comparable sales outperformed market expectations, indicating strong domestic performance.

Negative Factors

Profitability Impact

Wage Investments to Slightly Weigh on Profitability. The new minimum wage is $20/hr while all other pay scales also received slight hourly increases.

Valuation Concerns

Valuation looks increasingly frothy as the market digests a rapidly evolving macro dynamic and grows more critical of names with historic multiples.

Costco Business Overview & Revenue Model

Company Description

Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. It offers branded and private-label products in a range of merchandise categories. The company offers sundries, dry groceries, candies, coolers, freezers, liquor, and tobacco and deli products; appliances, electronics, health and beauty aids, hardware, garden and patio products, sporting goods, tires, toys and seasonal products, office supplies, automotive care products, postages, tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosks, and jewelry; and meat, produce, service deli, and bakery products. It also operates pharmacies, opticals, food courts, hearing-aid centers, and tire installation centers, as well as 636 gas stations; and offers business delivery, travel, same-day grocery, and various other services online in various countries. As of August 29, 2021, the company operated 815 membership warehouses, including 564 in the United States and Puerto Rico, 105 in Canada, 39 in Mexico, 30 in Japan, 29 in the United Kingdom, 16 in South Korea, 14 in Taiwan, 12 in Australia, 3 in Spain, 1 in Iceland, 1 in France, and 1 in China. It also operates e-commerce websites in the United States, Canada, the United Kingdom, Mexico, South Korea, Taiwan, Japan, and Australia. The company was formerly known as Costco Companies, Inc. and changed its name to Costco Wholesale Corporation in August 1999. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.

How the Company Makes Money

Costco makes money primarily through its membership-based wholesale retail model. The company charges an annual membership fee to individuals and businesses, which grants them access to its warehouse stores. This membership fee is a significant source of revenue and contributes to a substantial portion of the company's profits. In addition to membership fees, Costco generates revenue through the sale of products across various categories, including groceries, electronics, apparel, and home goods. The company's high-volume sales strategy enables it to negotiate favorable pricing with suppliers, which, in turn, allows Costco to offer competitive prices to its members. Costco also profits from ancillary services such as gas stations, pharmacies, and optical centers located within or near its warehouses. Furthermore, the company engages in partnerships with various brands and suppliers to offer exclusive products and services, enhancing its value proposition to members.

Costco Financial Statement Overview

Summary

Costco exhibits strong financial health with a solid income statement showing stable profitability and growth. The balance sheet is robust, with low leverage and efficient equity use. Cash flow generation is effective, highlighting Costco's capacity to manage cash and maintain a sustainable growth path.

Income Statement

Costco's income statement shows strong profitability and growth. The TTM Gross Profit Margin is approximately 13.29%, reflecting efficient cost management. The Net Profit Margin is 2.89%, which is stable for a retailer. Notably, the company has demonstrated consistent revenue growth, with a TTM Revenue Growth Rate of 3.79%. EBIT and EBITDA margins are robust at 3.69% and 4.26% respectively, indicating healthy operational performance.

Balance Sheet

The balance sheet is solid, with a low Debt-to-Equity Ratio of 0.09, showing prudent financial leverage. The Return on Equity is strong at 29.79%, highlighting efficient use of equity capital. The Equity Ratio stands at 34.92%, indicating a balanced capital structure. These metrics suggest financial stability and low risk, although there is room for improvement in equity proportion.

Cash Flow

Costco's cash flow statement reveals strong cash generation capabilities. The TTM Free Cash Flow has increased by 4.46%, showcasing effective cash management. The Operating Cash Flow to Net Income Ratio is 1.57, indicating efficient conversion of income to cash. The Free Cash Flow to Net Income Ratio is 0.91, reflecting a robust capacity to generate free cash relative to net income.

Breakdown
TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Income Statement		Total Revenue
264.09B	254.45B	242.29B	226.95B	195.93B	166.76B
	Gross Profit
35.11B	32.09B	29.70B	27.57B	25.25B	21.82B
	EBIT
9.75B	9.29B	8.11B	7.79B	6.71B	5.43B
	EBITDA
11.25B	12.15B	11.14B	10.28B	8.92B	7.37B
	Net Income Common Stockholders
7.62B	7.37B	6.29B	5.84B	5.01B	4.00B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
5.28B	11.14B	15.23B	11.05B	12.18B	13.30B
	Total Assets
26.04B	69.83B	68.99B	64.17B	59.27B	55.56B
	Total Debt
2.17B	8.27B	8.88B	9.04B	10.13B	10.17B
	Net Debt
-1.57B	-1.63B	-4.82B	-1.16B	-1.13B	-2.11B
	Total Liabilities
14.34B	46.21B	43.94B	43.52B	41.19B	36.85B
	Stockholders Equity
11.20B	23.62B	25.06B	20.64B	17.56B	18.28B
Cash Flow		Free Cash Flow
6.92B	6.63B	6.75B	3.50B	5.37B	6.05B
	Operating Cash Flow
11.96B	11.34B	11.07B	7.39B	8.96B	8.86B
	Investing Cash Flow
-4.66B	-4.41B	-4.97B	-3.92B	-3.54B	-3.89B
	Financing Cash Flow
-3.95B	-10.76B	-2.61B	-3.44B	-6.49B	-1.15B

Costco Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 964.31
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For COST, the sentiment is Positive. The current price of 964.31 is above the 20-day moving average (MA) of 928.85, below the 50-day MA of 984.31, and above the 200-day MA of 920.51, indicating a neutral trend. The MACD of -15.34 indicates Negative momentum. The RSI at 50.54 is Neutral, neither overbought nor oversold. The STOCH value of 65.55 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for COST.

Costco Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
WMT	79 Outperform	$672.05B	34.85	22.23%	0.96%	5.07%	25.86%
BJ	75 Outperform	$14.89B	28.27	32.33%	―	2.67%	2.72%
COST	71 Outperform	$428.24B	56.35	32.89%	0.51%	6.13%	12.14%
DG	65 Neutral	$18.92B	16.82	15.89%	2.69%	4.96%	-32.41%
DLTR	61 Neutral	$15.61B	―	18.88%	―	-9.88%	-205.57%
Sector *	59 Neutral	$11.76B	10.11	-0.70%	3.92%	1.27%	-16.30%
TGT	54 Neutral	$44.51B	11.03	29.12%	5.02%	-0.79%	-0.90%

Costco Corporate Events

Costco Announces Retirement of Executive VP Richard Galanti

On January 30, 2025, Richard Galanti retired as the Executive Vice President of Costco, a leading global retailer known for its membership-only warehouse clubs. Previously, he stepped down as Chief Financial Officer on March 15, 2024, and served on the Board of Directors until the 2025 Annual Meeting.