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Costco (COST)
NASDAQ:COST
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Costco
(NASDAQ:COST)78Outperform
Positive Factors
Earnings
Costco posted another month of solid sales growth with core comparable sales increasing by 9.8%.
E-commerce
E-commerce sales continue to outperform, showing a 15.2% increase on an adjusted basis.
Negative Factors
Valuation
Costco’s multiple remains a primary issue, with shares now trading at nearly 55x consensus NTM PE.
Costco (COST) vs. S&P 500 (SPY)
Market Cap
$460.27B
Dividend Yield0.44%
Average Volume (3M)1.97M
Price to Earnings (P/E)60.9
Beta (1Y)0.71
Revenue Growth5.35%
EPS Growth16.22%
CountryUS
Employees333,000
SectorConsumer Cyclical
Sector Strength53
IndustryRetailers - Staples
Share Statistics
EPS (TTM)17.03
Shares Outstanding443,898,860
10 Day Avg. Volume2,032,066
30 Day Avg. Volume1,974,919
Financial Highlights & Ratios
PEG Ratio3.75
Price to Book (P/B)N/A
Price to Sales (P/S)1.80
Price to Cash Flow (P/CF)35.60
P/FCF Ratio57.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$1,088.75Price Target Upside5.00% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering25
Costco Business Overview & Revenue Model
Company DescriptionIncorporated in 1983, Costco Wholesale Corp. operates an international chain of membership-only warehouse clubs. It sells product categories, including groceries, appliances, automotive supplies, toys, hardware, sporting goods, books, housewares, and apparel among others. The company is based in Issaquah, Washington.
How the Company Makes MoneyCostco 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 demonstrates strong financial health with robust revenue growth, solid profit margins, and efficient operational management. The balance sheet is stable with manageable debt levels, although stockholder equity shows minor areas for improvement. Despite a slight negative trend in free cash flow growth, cash generation remains strong, indicating a well-positioned company in the competitive retail industry.Income Statement
Costco demonstrates strong revenue growth, with a TTM increase of 5.9% compared to the previous annual period. The gross profit margin is solid at 12.7% for TTM, reflecting efficient cost management. The net profit margin is stable at 2.9%, indicating consistent profitability despite the competitive retail market. EBIT and EBITDA margins are healthy at 3.7% and 4.7%, respectively, supporting robust operational efficiency.85
Very Positive
Balance Sheet
Costco maintains a strong equity base with an equity ratio of 33.3%, indicating a stable financial structure. The debt-to-equity ratio is manageable at 0.33, reflecting prudent leverage usage. However, a decline in stockholders' equity over the periods suggests potential areas for improvement. Return on equity is impressive at 31.0%, highlighting effective utilization of shareholder funds to generate earnings.79
Positive
Cash Flow
Costco's free cash flow growth rate has been slightly negative in the TTM, but the operating cash flow remains robust, with a ratio of 1.31 to net income, indicating strong cash generation from operations. The free cash flow to net income ratio is 0.66, reflecting healthy cash flow management despite some fluctuations in capital expenditures.81
Very Positive
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 258.81B | 254.45B | 242.29B | 226.95B | 195.93B | 166.76B | Gross Profit |
| 32.80B | 32.09B | 29.70B | 27.57B | 25.25B | 21.82B | EBIT |
| 9.50B | 9.29B | 8.11B | 7.79B | 6.71B | 5.43B | EBITDA |
| 12.24B | 12.15B | 11.14B | 10.28B | 8.92B | 7.37B | Net Income Common Stockholders |
| 7.58B | 7.37B | 6.29B | 5.84B | 5.01B | 4.00B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 11.14B | 11.14B | 15.23B | 11.05B | 12.18B | 13.30B | Total Assets |
| 69.83B | 69.83B | 68.99B | 64.17B | 59.27B | 55.56B | Total Debt |
| 8.27B | 8.27B | 8.88B | 9.04B | 10.13B | 10.17B | Net Debt |
| -1.63B | -1.63B | -4.82B | -1.16B | -1.13B | -2.11B | Total Liabilities |
| 46.21B | 46.21B | 43.94B | 43.52B | 41.19B | 36.85B | Stockholders Equity |
| 23.62B | 23.62B | 25.06B | 20.64B | 17.56B | 18.28B |
| Cash Flow | Free Cash Flow | ||||
| 5.01B | 6.63B | 6.75B | 3.50B | 5.37B | 6.05B | Operating Cash Flow |
| 9.95B | 11.34B | 11.07B | 7.39B | 8.96B | 8.86B | Investing Cash Flow |
| -5.03B | -4.41B | -4.97B | -3.92B | -3.54B | -3.89B | Financing Cash Flow |
| -10.98B | -10.76B | -2.61B | -3.44B | -6.49B | -1.15B |
Costco Technical Analysis
Neutral
1036.87
Price Trends
984.63
Positive
956.38
Positive
905.26
Positive
Market Momentum
14.71
Positive
54.13
Neutral
51.58
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For COST, the sentiment is Neutral. The current price of 1036.87 is below the 20-day moving average (MA) of 1047.79, above the 50-day MA of 984.63, and above the 200-day MA of 905.26, indicating a neutral trend. The MACD of 14.71 indicates Positive momentum. The RSI at 54.13 is Neutral, neither overbought nor oversold. The STOCH value of 51.58 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for COST.
Costco Risk Analysis
Costco disclosed 26 risk factors in its most recent earnings report. Costco reported the most risks in the “Macro & Political” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Costco Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $460.27B | 60.89 | 30.98% | 0.44% | 5.35% | 16.22% | |
77 Outperform | $762.93B | 39.41 | 22.33% | 0.85% | 5.07% | 25.86% | |
73 Outperform | $13.35B | 24.28 | 31.64% | ― | 5.32% | 10.61% | |
70 Outperform | $53.67B | 12.41 | 30.16% | 3.69% | 0.64% | 20.16% | |
68 Neutral | $45.51B | 16.64 | 21.45% | 1.99% | 1.41% | 46.58% | |
60 Neutral | $13.01B | 10.45 | 0.79% | 3.53% | 1.60% | -22.47% | |
56 Neutral | $14.34B | ― | -12.55% | ― | 5.19% | -190.36% |
* Consumer Cyclical Sector Average
Performance Comparison
COST
Costco
1,036.87
281.06
37.19%
DLTR
Dollar Tree
66.68
-82.40
-55.27%
KR
Kroger Company
63.18
14.76
30.48%
TGT
Target
117.14
-46.40
-28.37%
WMT
Walmart
94.97
35.64
60.07%
BJ
Bj's Wholesale Club Holdings
101.09
27.87
38.06%
Costco Earnings Call Summary
Earnings Call Date: Dec 12, 2024 | % Change Since: 5.02% | Next Earnings Date: Mar 6, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial growth, record-breaking warehouse openings, and impressive e-commerce and membership expansion. However, challenges included slight declines in membership renewal rates and impacts from gasoline deflation and potential tariffs. Overall, the positive achievements predominantly overshadowed the lowlights.Highlights
Record Warehouse Openings
Costco opened 7 new warehouses in Q1 2025, including 1 relocation, resulting in 6 net new buildings, with 4 outside of the U.S. The newest warehouse in Pleasanton, California, achieved the highest-ever opening day sales for a U.S. warehouse at $2.9 million.
Strong Financial Performance
Net income for Q1 2025 was $1.798 billion, or $4.04 per diluted share, up from $1.589 billion, or $3.58 per diluted share, in Q1 2024. Net sales increased by 7.5% to $60.99 billion.
E-commerce Growth
E-commerce comp sales were up 13%, with Costco Logistics completing nearly 1 million deliveries in Q1. The majority of these deliveries were completed in 4 days from order.
Membership Growth
Costco ended Q1 2025 with 77.4 million paid household members, a 7.6% increase from the previous year. Paid Executive Memberships grew by 9.2%.
Innovative Product Offerings
Introduction of new Kirkland Signature products and partnerships with brands like Peloton and Wrangler. Notable product sales included 4.2 million pies sold before Thanksgiving and record sales in food courts on Halloween.
Lowlights
Decreased Renewal Rates
U.S. and Canada renewal rates dropped by 0.1% to 92.8%, and worldwide rates decreased by 0.1% to 90.4%, primarily due to a mix shift towards digital sign-ups.
Impact of Gasoline Deflation
Gasoline price deflation negatively impacted sales by approximately 1.6%.
Tariff Concerns
Potential tariffs could raise costs, creating uncertainty around inflation and impacting imported goods, which constitute a minority of Costco's business.
Company Guidance
During Costco's Q1 2025 earnings call, detailed guidance was provided on various performance metrics. The company reported a net income of $1.798 billion, or $4.04 per diluted share, which marked an increase from $1.589 billion, or $3.58 per diluted share, in the same quarter the previous year. Net sales grew by 7.5% to $60.99 billion. U.S. comparable sales increased by 5.2%, while Canada and other international comparable sales rose by 5.8% and 4.7%, respectively. E-commerce sales saw a significant increase of 13%. Membership fee income grew by 7.8% to $1.166 billion, with renewal rates slightly down to 92.8% in the U.S. and Canada. The company also highlighted a gross margin increase of 24 basis points year-over-year to 11.28%. Capital expenditures for the quarter were approximately $1.26 billion, with full-year expectations set at about $5 billion. The call also discussed Costco's continued expansion plans, including 29 new warehouse openings in fiscal year 2025, with a focus on international growth.Costco Corporate Events
Executive/Board ChangesShareholder Meetings
Costco Announces Retirement of Executive VP Richard Galanti
Neutral
Feb 3, 2025
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.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.