Costco Wholesale Corporation (COST)
Valuation Overview•Is Costco Wholesale Corporation Overvalued or Undervalued?
Priced at a premium to peer multiples and intrinsic cash flows, demanding strong execution to justify current levels.
Moderate quality score of 64/100, reflecting stable operating margins and manageable leverage.
Analysts remain bullish, forecasting further upside expansion with consensus targets suggesting solid gains.
Verdict: Solid fundamental quality, though growth presents a headwind.
Wall Street is highly bullish, projecting significant upside with steady expected earnings growth. However, capital return yields remain modest, anchored by a strong, well-covered dividend yield.
COST demonstrates adequate business quality with stable profitability. This is backed by a fortress balance sheet, holding significant net cash ($6.0B) and minimal debt risk.
The company demonstrates solid revenue growth (6.6% 3Y CAGR) paired with robust earnings compounding (11.5% EPS 3Y CAGR). However, profitability remains a major concern with severely compressed operating margins (3.8%).
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $70.5B | +8.2% | +6.6% | +10.5% | +9.0% | |
| EBITDA | $3.4B | — | +9.7% | — | — | |
| Net Income | $2.2B | +9.9% | +11.5% | — | +13.0% | |
| EPS (Diluted) | $4.93 | +10.0% | +11.5% | +15.1% | +13.0% | |
| Free Cash Flow | $2.0B | +18.2% | +30.8% | +5.3% | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 12.9% | 12.6% | 12.5% | 12.8% |
| Operating Margin | 3.8% | 3.6% | 3.5% | 3.3% |
| Net Margin | 3.0% | 2.8% | 2.7% | 2.5% |
| FCF Margin | 3.0% | 2.7% | 2.5% | 2.4% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $4.94 | $4.93 | -0.2% | ||
| Q1'26 | $4.55 | $4.58 | +0.7% | ||
| Q4'25 | $4.27 | $4.34 | +1.6% | ||
| Q3'25 | $5.80 | $5.87 | +1.2% | ||
| Q2'25 | $4.24 | $4.28 | +0.9% | ||
| Q1'25 | $4.09 | $4.02 | -1.7% | ||
| Q4'24 | $3.79 | $3.82 | +0.8% | ||
| Q3'24 | $5.08 | $5.15 | +1.4% |
Total return is -1.9% (1Y), lagging the benchmark by -26.8%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | +11.7% | +2.4% | — |
| 1Y | -1.9% | -26.8% | +0.6% |
| 3YCAGR | +23.6% | +4.6% | +5.7% |
| 5YCAGR | +21.0% | +8.6% | +9.5% |
| 10YCAGR | +20.6% | +7.1% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about Costco Wholesale Corporation (COST) valuation, health, and returns.
Costco Wholesale Corporation is estimated to be overvalued under our discounted cash flow framework. relative multiples indicate the stock is Expensive versus peers compared to industry peers. overvalued (implying -39.2% downside from DCF intrinsic value of $578.63)
Costco Wholesale Corporation has multiple valuation anchors: DCF Intrinsic Value: $578.63 | Peer Relative Fair Value: $464.84 | Wall Street Analyst Target: $1109.92 (implying +16.7% upside). A convergence of these signals offers higher conviction.
Costco Wholesale Corporation displays good financial health with a composite quality score of 64/100, supported by a Altman Z-Score of 9.8 (safe zone), Piotroski F-Score of 7/9, Return on Invested Capital (ROIC) of 34.5%.
Costco Wholesale Corporation pays a 0.5% dividend yield, covered by a 27% payout ratio with 22 years of growth, supplemented by a 0.2% buyback yield.
Costco Wholesale Corporation's current growth trajectory is Stable. The company achieved +8.2% 1Y revenue growth and +10.0% 1Y EPS growth, compared to its 3Y revenue CAGR of +6.6%.
Wall Street consensus is Buy based on 58 analysts, beating EPS expectations in 83% of recent quarters with a -1-quarter streak. The consensus price target represents a +16.7% change from current levels.
Investment risks for Costco Wholesale Corporation include: -15.4% 1-year max drawdown. Volatility risk is characterized by a beta of -0.05x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.