COST  Costco Wholesale Corporation

Exchange

NASDAQ

Sector

Consumer Services

Industry

Department/Specialty Retail Stores

Market Cap.

75.67B

Vuru Grade

38.96/100

Current Price

$172.40
+0.76 (+0.44%)

Growth Price

$44.79
Overvalued by 74.02%

Stability Price

$36.66
Overvalued by 78.74%

Company Metrics

  • P/E 31.80
  • P/S 0.62
  • P/B 6.06
  • EPS 5.42
  • Cash ROIC 13.77%
  • Cash Ratio 0.30
  • Dividend 2.00 / 1.17 %
  • Avg. Vol. 2.32M
  • Shares 438.92M
  • Market Cap. 75.67B

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

How Costco Wholesale Corporation Makes Most of Its Money
Motley Fool - May 5, 2017
It certainly is for most retailers, but in Costco's case, it's not. The warehouse club makes arguably all of its profit from membership fees.
Better Buy: Costco Wholesale Corporation vs. Amazon.com, Inc.
Motley Fool - May 4, 2017
We're focusing on whether Costco or Amazon is the better buy at today's prices. While we can't answer that question with 100% certainty, we can look at it through three different lenses.
Costco: Light On Catalysts, Pricey Stock
Seeking Alpha - 11 hours ago
Costco will report fiscal 3Q17 earnings this Thursday, and I expect it to be as uneventful as the stock. A couple of recently announced events, while arguably bullish, should have already been priced into the stock and largely been reflected in ...
Go Long Costco Wholesale Corporation (COST) Stock at a Discount
Investorplace.com - May 19, 2017
Click to Enlarge But first I need to fundamentally vet Costco stock. At first glance, it appears expensive relative to its peers but look a little deeper and it becomes clear that management has earned it since they made COST one of few retailers ...
If You Lack Direction On Costco Wholesale Corporation (COST), You Need to Read ... - USA Commerce Daily
Why investor are still jaunty on these stocks: Costco Wholesale Corporation ... - The USA Commerce
3 Reasons Why You Should Buy Costco Now
Seeking Alpha - May 11, 2017
Costco Wholesale Corporation (NASDAQ:COST) operates membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, Spain, and through its subsidiaries in Taiwan and Korea.
Costco Wholesale Corporation (NASDAQ:COST) Is Headed to $200, According to ...
Library For Smart Investors - May 12, 2017
Costco Wholesale Corporation (NASDAQ:COST) is the country's largest membership-only warehouse and one of the biggest retailers in the world.
Costco Wholesale Corporation (COST): What can we expect in the future? - Simply Wall St
Costco: Buying Dividend Growth In Bulk
Seeking Alpha - May 8, 2017
When we were saving for our wedding in 2014, my wife and I realized we would have to do a much better job of tracking our spending.
Costco Wholesale Corporation (COST) Stock Can Pay You in Bulk
Investorplace.com - May 9, 2017
Consider Costco Wholesale Corporation (NASDAQ:COST) which fell 4% on Monday, related to the $7 special dividend it recently announced.
Earnings Clues on Costco Wholesale Corporation (COST), QEP Resources, Inc ... - StockNewsJournal
Analysts Take on Costco Wholesale Corporation (NASDAQ:COST) - ExpertGazette
Costco: Time To Cash Out?
Seeking Alpha - May 1, 2017
Costco (NASDAQ:COST) announced last Wednesday that it would issue a special dividend of $7.00 per share payable to shareholders on the books as of May 10, 2017.
Is Costco Overvalued?
Seeking Alpha - Apr 27, 2017
Costco (NASDAQ:COST) has been outperforming competitors Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) in stock price performance over the last year by a healthy margin.
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.

$172.40 Current Price

$44.79 Growth Price (DCF)

Overvalued by 74.02%


Growth Rate Assumed by Market: 65.69%


Future Free Cash Flow Growth Rate: 15.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$36.66 Stability Price (EPV)

Overvalued by 78.74%


Discount Rate: 15.0%

$108.01 Book Price

Overvalued by 37.35%


Shrinking Cash Return on Invested Capital over the past 5 years

COST has less efficiently invested its financial resources in buildings, projects, and equipment, resulting in increasingly weaker returns. Look at its Annual Reports to determine whether this decrease has been caused by one-time events or a more general decrease in investment returns.

COST has created $13.77 of cash for every $100 invested.
Figures in USD. Fiscal year ends in August
20122013201420152016
Free Cash Flow 1.58B 1.35B 1.99B 1.89B 643.00M
divided by
Invested Capital 10.03B 10.90B 11.30B 10.48B 12.86B
Cash ROIC 15.73% 12.42% 17.62% 18.05% 5.00%

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 $18.53 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in August
20122013201420152016
Net Income 1.77B 2.06B 2.09B 2.41B 2.38B
divided by
Stockholders' Equity 12.36B 10.83B 12.30B 10.62B 12.08B
Return on Equity 14.29% 19.03% 16.97% 22.69% 19.67%

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
2007200820092010201120122013201420152016
Free Cash Flow 690.71M 577.60M 842.00M 1.73B 1.91B 1.58B 1.35B 1.99B 1.89B 643.00M

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
2007200820092010201120122013201420152016
Cash 3.36B 3.28B 3.73B 4.75B 5.61B 4.85B 6.12B 7.32B 6.42B 4.73B
Current Assets 9.32B 9.46B 10.34B 11.71B 13.71B 13.53B 15.84B 17.59B 17.30B 15.22B
Total Assets 19.61B 20.68B 21.98B 23.82B 26.76B 27.14B 30.28B 33.02B 33.44B 33.16B
Current Liabilities 8.58B 8.87B 9.28B 10.06B 12.05B 12.26B 13.26B 14.41B 16.54B 15.58B
Total Liabilities 10.98B 11.49B 11.96B 12.99B 14.76B 14.78B 19.45B 20.72B 22.82B 21.08B
Stockholder' Equity 8.62B 9.19B 10.02B 10.83B 12.00B 12.36B 10.83B 12.30B 10.62B 12.08B
Current Ratio 1.09 1.07 1.11 1.16 1.14 1.10 1.19 1.22 1.05 0.98
TL-to-TA 0.56 0.56 0.54 0.55 0.55 0.54 0.64 0.63 0.68 0.64

Consistent Reinvestment of Profits over the past 10 years

COST has consistently retained profits. This may put COST in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, COST can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in August
2007200820092010201120122013201420152016
Retained Earnings 5.13B 5.36B 6.10B 6.59B 7.11B 7.83B 6.28B 7.46B 6.52B 7.69B
Retained Earnings Growth - 4.45% 13.81% 8.02% 7.91% 10.17% -19.80% 18.70% -12.60% 17.92%

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 $1.80 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in August
2007200820092010201120122013201420152016
Net Income 1.08B 1.28B 1.09B 1.30B 1.46B 1.77B 2.06B 2.09B 2.41B 2.38B
divided by
Revenue 64.40B 72.48B 71.42B 77.95B 88.92B 99.14B 105.16B 112.64B 116.20B 118.72B
Net Profit Margin 1.68% 1.77% 1.52% 1.67% 1.64% 1.78% 1.96% 1.85% 2.07% 2.00%

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 $12.67 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
2007200820092010201120122013201420152016
Gross Profit 7.95B 8.98B 9.09B 9.95B 11.18B 12.31B 13.21B 14.18B 15.13B 15.82B
divided by
Revenue 64.40B 72.48B 71.42B 77.95B 88.92B 99.14B 105.16B 112.64B 116.20B 118.72B
Gross Margin 12.35% 12.39% 12.72% 12.77% 12.57% 12.42% 12.56% 12.59% 13.02% 13.32%

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.

102.80% 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
2007200820092010201120122013201420152016
Capital Expenditure 1.39B 1.60B 1.25B 1.06B 1.29B 1.48B 2.08B 1.99B 2.39B 2.65B
divided by
Net Income 1.08B 1.28B 1.09B 1.30B 1.46B 1.77B 2.06B 2.09B 2.41B 2.38B
Capital Expenditure Ratio 127.98% 124.62% 115.10% 80.97% 88.24% 83.76% 101.07% 95.45% 99.34% 111.49%

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
2007200820092010201120122013201420152016
Dividend Paid 245.74M 265.03M 296.00M 338.00M 389.00M 446.00M 3.56B 584.00M 2.87B 746.00M
divided by
Shares Outstanding 457.64M 444.24M 440.45M 445.97M 443.09M 439.37M 440.51M 442.49M 442.72M 441.26M
Dividend Paid Per Share 0.54 0.60 0.67 0.76 0.88 1.02 8.08 1.32 6.47 1.69
Price at Year End 66.66 49.02 58.40 71.80 83.08 96.97 118.77 143.52 162.71 160.11
Dividend Yield 0.81% 1.22% 1.15% 1.06% 1.06% 1.05% 6.80% 0.92% 3.98% 1.06%

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
2007200820092010201120122013201420152016
Shares Outstanding 457.64M 444.24M 440.45M 445.97M 443.09M 439.37M 440.51M 442.49M 442.72M 441.26M
Stock Bought Back - 3.02% 0.86% -1.24% 0.65% 0.85% -0.26% -0.45% -0.05% 0.33%
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