COST  Costco Wholesale Corporation

Exchange

NASDAQ

Sector

Consumer Services

Industry

Department/Specialty Retail Stores

Market Cap.

70.42B

Vuru Grade

39.10/100

Current Price

$161.08
+0.85 (+0.53%)

Growth Price

$138.54
Overvalued by 13.99%

Stability Price

$48.05
Overvalued by 70.17%

Company Metrics

  • P/E 26.49
  • P/S 0.54
  • P/B 6.5
  • EPS 6.08
  • Cash ROIC 17.08%
  • Cash Ratio 0.33
  • Dividend 2 / 1.23%
  • Avg. Vol. 3.35M
  • Shares 437.17M
  • Market Cap. 70.42B

Company Description

Costco Wholesale Corporation operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. The company's product categories include candy, snack foods, tobacco, alcoholic and non-alcoholic beverages, and cleaning and institutional supplies; appliances, electronics, health and beauty ... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

There is no news available at this time.
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for COST to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate COST's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$161.08 Current Price

$138.54 Growth Price (DCF)

Overvalued by 13.99%


Growth Rate Assumed by Market: 19.33%


Future Free Cash Flow Growth Rate: 15.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$48.05 Stability Price (EPV)

Overvalued by 70.17%


Discount Rate: 15.0%

$98.10 Book Price

Overvalued by 39.10%


Excellent Cash Return on Invested Capital over the past 5 years

COST has efficiently invested its financial resources in buildings, projects, and equipment, resulting in strong returns. Annual Reports can be useful in identifying the cause of one-time events and future sustainability.

COST has created $17.08 of cash for every $100 invested.
Figures in USD. Fiscal year ends in August
20132014201520162017
Free Cash Flow 1.35B 1.99B 1.89B 643.00M 4.22B
divided by
Invested Capital 10.90B 11.30B 10.48B 12.86B 13.07B
Cash ROIC 12.42% 17.62% 18.05% 5.00% 32.31%

Excellent Return on Equity over the past 5 years

Over the past 5 years, COST has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

COST has generated $20.71 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in August
20132014201520162017
Net Income 2.06B 2.09B 2.41B 2.38B 2.71B
divided by
Stockholders' Equity 10.83B 12.30B 10.62B 12.08B 10.78B
Return on Equity 19.03% 16.97% 22.69% 19.67% 25.18%

Excellent Business Performance over the past 10 years

COST has been able to maintain profitability in good times and bad. This could mean COST has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

COST has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in August
2008200920102011201220132014201520162017
Free Cash Flow 577.60M 842.00M 1.73B 1.91B 1.58B 1.35B 1.99B 1.89B 643.00M 4.22B

Weak Balance Sheet

COST's financial position is not ideal. The key is to check whether COST is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in August
2008200920102011201220132014201520162017
Cash 3.28B 3.73B 4.75B 5.61B 4.85B 6.12B 7.32B 6.42B 4.73B 5.78B
Current Assets 9.46B 10.34B 11.71B 13.71B 13.53B 15.84B 17.59B 17.30B 15.22B 17.32B
Total Assets 20.68B 21.98B 23.82B 26.76B 27.14B 30.28B 33.02B 33.44B 33.16B 36.35B
Current Liabilities 8.87B 9.28B 10.06B 12.05B 12.26B 13.26B 14.41B 16.54B 15.58B 17.50B
Total Liabilities 11.49B 11.96B 12.99B 14.76B 14.78B 19.45B 20.72B 22.82B 21.08B 25.57B
Stockholder' Equity 9.19B 10.02B 10.83B 12.00B 12.36B 10.83B 12.30B 10.62B 12.08B 10.78B
Current Ratio 1.07 1.11 1.16 1.14 1.10 1.19 1.22 1.05 0.98 0.99
TL-to-TA 0.56 0.54 0.55 0.55 0.54 0.64 0.63 0.68 0.64 0.70

Low or No Reinvestment of Profits over the past 10 years

COST has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to COST operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in USD. Fiscal year ends in August
2008200920102011201220132014201520162017
Retained Earnings 5.36B 6.10B 6.59B 7.11B 7.83B 6.28B 7.46B 6.52B 7.69B 5.99B
Retained Earnings Growth - 13.81% 8.02% 7.91% 10.17% -19.80% 18.70% -12.60% 17.92% -22.09%

Highly Competitive Industry over the past 10 years

It's likely that COST is in an industry with low barriers to entry, spurring high competition. If Gross Margins are at least satisfactory, it's likely COST invests heavily in R&D and Sales, General & Administrative expenses.

Only $1.84 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in August
2008200920102011201220132014201520162017
Net Income 1.28B 1.09B 1.30B 1.46B 1.77B 2.06B 2.09B 2.41B 2.38B 2.71B
divided by
Revenue 72.48B 71.42B 77.95B 88.92B 99.14B 105.16B 112.64B 116.20B 118.72B 129.03B
Net Profit Margin 1.77% 1.52% 1.67% 1.64% 1.78% 1.96% 1.85% 2.07% 2.00% 2.10%

Weak Pricing Power over the past 10 years

COST is likely in a highly competitive industry, due to low barriers to entry. It's because of this, that COST has been unable to raise prices and increase their profitability. This puts them in a poor position if inflation becomes an issue, as they would struggle to pass higher costs onto consumers.

Only $12.77 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in August
2008200920102011201220132014201520162017
Gross Profit 8.98B 9.09B 9.95B 11.18B 12.31B 13.21B 14.18B 15.13B 15.82B 17.14B
divided by
Revenue 72.48B 71.42B 77.95B 88.92B 99.14B 105.16B 112.64B 116.20B 118.72B 129.03B
Gross Margin 12.39% 12.72% 12.77% 12.57% 12.42% 12.56% 12.59% 13.02% 13.32% 13.29%

High Capital Intensity over the past 10 years

COST spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

99.22% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in August
2008200920102011201220132014201520162017
Capital Expenditure 1.60B 1.25B 1.06B 1.29B 1.48B 2.08B 1.99B 2.39B 2.65B 2.50B
divided by
Net Income 1.28B 1.09B 1.30B 1.46B 1.77B 2.06B 2.09B 2.41B 2.38B 2.71B
Capital Expenditure Ratio 124.62% 115.10% 80.97% 88.24% 83.76% 101.07% 95.45% 99.34% 111.49% 92.19%

Very Strong Dividend History over the past 10 years

COST has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests COST is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in August
2008200920102011201220132014201520162017
Dividend Paid 265.03M 296.00M 338.00M 389.00M 446.00M 3.56B 584.00M 2.87B 746.00M 3.90B
divided by
Shares Outstanding 444.24M 440.45M 445.97M 443.09M 439.37M 440.51M 442.49M 442.72M 441.26M 440.94M
Dividend Paid Per Share 0.60 0.67 0.76 0.88 1.02 8.08 1.32 6.47 1.69 8.85
Price at Year End 49.02 58.40 71.80 83.08 96.97 118.77 143.52 162.71 160.11 171.26
Dividend Yield 1.22% 1.15% 1.06% 1.06% 1.05% 6.80% 0.92% 3.98% 1.06% 5.17%

History of Stock Buybacks over the past 10 years

COST has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in August
2008200920102011201220132014201520162017
Shares Outstanding 444.24M 440.45M 445.97M 443.09M 439.37M 440.51M 442.49M 442.72M 441.26M 440.94M
Stock Bought Back - 0.86% -1.24% 0.65% 0.85% -0.26% -0.45% -0.05% 0.33% 0.07%
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