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Costco Wholesale Corporation analysis

Costco Wholesale Corporation analysis

19 January 2022

Costco operates a chain of large retail stores that are accessed by membership cards only. It is the fifth largest retailer in the world. The company has 823 warehouses around the world:

571 in the USA,

105 in Canada,

39 in Mexico,

30 in Japan,

29 in the UK,

16 in Korea,

14 in Taiwan,

13 in Australia,

3 in Spain,

1 in Iceland,

1 in France,

1 in China.

113 million people have a Costco card. The company is headquartered in Issaquah, Washington, and was founded in 1976.

The company has been developing steadily for many years and is a model for a growth investor. In the last 4 years, free cash flow has grown by 80%, profit by 45% and revenue by 35%. At the same time, the company has a stable capex, a regular small buyback ($200-300 thousand per year), constantly growing small dividends and a lot of cash on the accounts.


P/E 49.5 (current average for competitors 25.6)

P/B 1.2 (industry average 1)

P/S 14 (industry average 7)

Debt of $10.2 billion with current operating cash flow of $9.57 billion

Dividends 0.59% per annum

Share Price: $503

The discounted cash flow model shows a fair price of $499.

Simply Wall Street values the company at $742.

23 analysts leading the company give an average estimate of $560.

Obviously, you have to overpay for such beautiful charts of stable growth, but recently P/E has just flown away: from 2010 to 2015, the company was worth 17-25 profits. From 2015 to 2020 it was worth 25-31 profits. From 2020 to the current day there are already almost 50 profits.

24854963 – costco wholesale storefront

The stock is trading below the 20 and 50 daily averages, but well above the 200 daily average, which is currently running at $448. In the last 2 weeks the shares have fallen heavily, the cost began to return to a more fair one. The price of $450 would be good for purchases, but it is not certain that the rate will fall to these values.

Conclusion: Over the past 5 years, Costco has grown almost twice compared to any other company in its industry. Today, Costco’s business is safe, marginal, and in demand. For any possible troubles, the company has $ 6 billion in cash in a pod. And if you plan to hold these shares for decades, then probably, no matter at what price you take them, it will grow even more. But people don’t like to pay much. Costco is now more expensive than any industry average of all the major P/E, P/B, P/FCF, P/S multiples. The price (P) is high. This is indirectly confirmed by insider transactions: they sold shares 13 times over the past year, and there was only one purchase on December 21.

Get advice on the company’s shares: 

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