Costco Wholesale Corporation
Costco Wholesale Corporation Fundamental Analysis
Costco Wholesale Corporation (COST) shows moderate financial fundamentals with a PE ratio of 53.10, profit margin of 2.96%, and ROE of 29.61%. The company generates $280.3B in annual revenue with moderate year-over-year growth of 5.02%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 64.8/100 based on profitability, valuation, growth, and balance sheet metrics. The C+ grade reflects average fundamentals, with notable risks in certain areas.
Fundamental Health Score
We analyze COST's fundamental strength across five key dimensions:
Efficiency Score
ExcellentCOST demonstrates superior asset utilization.
Valuation Score
WeakCOST trades at a premium to fair value.
Growth Score
ExcellentCOST delivers strong and consistent growth momentum.
Financial Health Score
ExcellentCOST maintains a strong and stable balance sheet.
Profitability Score
ModerateCOST maintains healthy but balanced margins.
Key Financial Metrics
Is COST Expensive or Cheap?
P/E Ratio
COST trades at 53.10 times earnings. This suggests a premium valuation.
PEG Ratio
When adjusting for growth, COST's PEG of 21.07 indicates potential overvaluation.
Price to Book
The market values Costco Wholesale Corporation at 14.55 times its book value. This suggests the stock is fully valued or overvalued on an asset basis.
EV/EBITDA
Enterprise value stands at 32.71 times EBITDA. This signals the market has high growth expectations.
How Well Does COST Make Money?
Net Profit Margin
For every $100 in sales, Costco Wholesale Corporation keeps $2.96 as profit after all expenses.
Operating Margin
Core operations generate 3.80 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $29.61 in profit for every $100 of shareholder equity.
ROA
Costco Wholesale Corporation generates $10.03 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Costco Wholesale Corporation generates limited operating cash flow of $14.76B, signaling weaker underlying cash strength.
Free Cash Flow
Costco Wholesale Corporation produces free cash flow of $9.00B, offering steady but limited capital for shareholder returns and expansion.
FCF Per Share
Each share generates $20.28 in free cash annually.
FCF Yield
COST converts 2.04% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
53.10
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
21.07
vs 25 benchmark
P/B Ratio
Price to book value ratio
14.55
vs 25 benchmark
P/S Ratio
Price to sales ratio
1.57
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.27
vs 25 benchmark
Current Ratio
Current assets to current liabilities
1.04
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.30
vs 25 benchmark
ROA
Return on assets percentage
0.10
vs 25 benchmark
ROCE
Return on capital employed
0.26
vs 25 benchmark
How COST Stacks Against Its Sector Peers
| Metric | COST Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 53.10 | 23.21 | Worse (Expensive) |
| ROE | 29.61% | 1251.00% | Weak |
| Net Margin | 2.96% | -5497.00% (disorted) | Weak |
| Debt/Equity | 0.27 | 0.79 | Strong (Low Leverage) |
| Current Ratio | 1.04 | 2.44 | Neutral |
| ROA | 10.03% | -200095.00% (disorted) | Strong |
COST outperforms its industry in 2 out of 6 key metrics, particularly excelling in ROA, but lagging in P/E Ratio.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Costco Wholesale Corporation's 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
65.07%
Industry Style: Defensive, Dividend, Low Volatility
High GrowthEPS CAGR
99.45%
Industry Style: Defensive, Dividend, Low Volatility
High GrowthFCF CAGR
76.73%
Industry Style: Defensive, Dividend, Low Volatility
High Growth