Costco Wholesale Corporation isn’t just about bulk shopping; it’s a transformative force in the retail landscape, redefining how consumers access quality products at unbeatable prices. Known for its exceptional membership model and diverse product range, Costco has solidified its reputation for efficiency and value. As we delve into the investment potential of this retail powerhouse, the question arises: do Costco’s current fundamentals and growth prospects still justify its market valuation?
Table of contents
Company Description
Costco Wholesale Corporation, founded in 1976 and headquartered in Issaquah, Washington, operates as a leading membership-based warehouse retailer. With over 815 locations across the U.S., Canada, Mexico, and several other countries, Costco offers a diverse range of products, including groceries, electronics, and household goods. The company is recognized as a dominant player in the discount retail sector, providing both branded and private-label items. In addition to its core grocery and general merchandise offerings, Costco operates pharmacies, optical centers, and gas stations, enhancing its value proposition. By focusing on membership and low prices, Costco positions itself as a key influencer in the retail industry, driving innovation and customer loyalty.
Fundamental Analysis
In this section, I will conduct a fundamental analysis of Costco Wholesale Corporation, examining its income statement, financial ratios, and dividend payout policy.
Income Statement
The following table presents the Income Statement of Costco Wholesale Corporation over the last five fiscal years, highlighting key financial metrics.
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue | 195.93B | 226.95B | 242.29B | 254.45B | 275.24B |
| Cost of Revenue | 170.68B | 199.38B | 212.59B | 222.36B | 239.89B |
| Operating Expenses | 18.54B | 19.78B | 21.59B | 22.81B | 24.97B |
| Gross Profit | 25.25B | 27.57B | 29.70B | 32.10B | 35.35B |
| EBITDA | 8.92B | 10.28B | 11.14B | 12.15B | 13.40B |
| EBIT | 6.85B | 7.99B | 8.65B | 9.91B | 10.97B |
| Interest Expense | 0.17B | 0.16B | 0.16B | 0.17B | 0.15B |
| Net Income | 5.01B | 5.84B | 6.29B | 7.37B | 8.10B |
| EPS | 11.30 | 13.17 | 14.18 | 16.60 | 18.24 |
| Filing Date | 2021-10-06 | 2022-10-05 | 2023-10-11 | 2024-10-09 | 2025-10-08 |
Interpretation of Income Statement
Over the five-year period, Costco has shown a steady increase in both Revenue and Net Income, with 2025 reaching $275.24B and $8.10B, respectively. The Gross Profit margin has improved, reflecting better cost management, with Gross Profit rising from $25.25B in 2021 to $35.35B in 2025. In the most recent fiscal year, we see a significant growth in Revenue compared to 2024, suggesting strong consumer demand. However, the operating expenses have also risen, indicating the need for careful cost management to sustain profitability. Overall, Costco appears to be in a robust position, although monitoring expense growth will be crucial moving forward.
Financial Ratios
Below is the summary of Costco Wholesale Corporation’s financial ratios over the years.
| Metrics | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Net Margin | 2.56% | 2.57% | 2.60% | 2.90% | 2.94% |
| ROE | 28.51% | 28.31% | 25.11% | 31.19% | 27.77% |
| ROIC | 16.65% | 18.24% | 16.48% | 20.37% | 19.44% |
| P/E | 40.31 | 39.64 | 38.75 | 53.77 | 51.71 |
| P/B | 11.49 | 11.22 | 9.73 | 16.77 | 14.36 |
| Current Ratio | 1.00 | 1.02 | 1.07 | 0.97 | 1.03 |
| Quick Ratio | 0.52 | 0.46 | 0.57 | 0.44 | 0.55 |
| D/E | 0.58 | 0.44 | 0.35 | 0.35 | 0.28 |
| Debt-to-Assets | 17.10% | 14.09% | 12.88% | 11.85% | 10.60% |
| Interest Coverage | 39.23 | 49.32 | 50.71 | 54.94 | 67.42 |
| Asset Turnover | 3.31 | 3.54 | 3.51 | 3.64 | 3.57 |
| Fixed Asset Turnover | 7.43 | 8.28 | 8.24 | 8.04 | 7.95 |
| Dividend Yield | 2.85% | 0.65% | 0.51% | 2.28% | 0.52% |
Interpretation of Financial Ratios
Costco Wholesale Corporation (COST) exhibits a mixed financial health profile based on its latest ratios. The current ratio stands at 1.03, suggesting adequate liquidity, though the quick ratio of 0.55 raises concerns about immediate cash availability. Its solvency ratio of 0.22 indicates a modest reliance on debt, while a debt-to-equity ratio of 0.28 suggests a conservative capital structure. Profitability metrics show a net profit margin of 2.94%, which is relatively low and could signal pricing power issues. Efficiency is strong, with a receivables turnover of 85.93 and an asset turnover of 3.57, indicating effective asset management. Overall, while Costco maintains a solid financial position, the low profitability margins warrant cautious observation.
Evolution of Financial Ratios
Over the past five years, Costco has shown gradual improvements in its profitability and efficiency ratios. The net profit margin has consistently increased, reflecting better cost management, while liquidity ratios remain stable, indicating solid financial health amidst a growing revenue base.
Distribution Policy
Costco Wholesale Corporation (COST) maintains a balanced distribution policy that includes dividends and share buybacks. The current dividend payout ratio stands at approximately 27%, reflecting a sustainable approach to returning capital to shareholders. The annual dividend yield is around 0.52%, with a consistent trend in dividend per share growth. Additionally, Costco actively repurchases shares, enhancing shareholder value. This distribution strategy appears to support long-term value creation while managing risks associated with excessive payouts or debt.
Sector Analysis
Costco Wholesale Corporation operates in the discount retail sector, offering a diverse range of products including groceries, electronics, and household goods, while facing competition from Walmart and Sam’s Club. Its competitive advantages lie in its membership model and efficient supply chain management.
Strategic Positioning
Costco Wholesale Corporation (COST) holds a significant position in the discount retail sector, boasting a market share that reflects its robust membership model and diverse product offerings. With a market capitalization of approximately $396.5B, it faces competitive pressure from both traditional retailers and emerging e-commerce platforms. Technological disruptions, particularly in online shopping, are reshaping the landscape, yet Costco’s strategic investments in e-commerce and efficient supply chain management help mitigate these challenges. The company’s ability to adapt will be crucial in maintaining its competitive edge.
Revenue by Segment
The chart below illustrates Costco’s revenue distribution by segment for the fiscal year 2025, highlighting the performance of various categories and their contributions to the overall revenue.
In FY 2025, Costco’s revenue reached significant heights, with “Food and Sundries” leading at 110.0B, followed by “Non-Foods” at 71.2B and “Fresh Food” at 37.9B. Notably, “Membership” revenue grew to 5.3B, indicating a strong retention and acquisition strategy. The overall trend shows accelerated growth across all segments compared to previous years, notably with “Food and Sundries” reflecting a 8.3% increase from 101.5B in FY 2024. However, the concentration in “Food and Sundries” may pose margin risks if consumer preferences shift.
Key Products
Costco Wholesale Corporation offers a diverse range of products that cater to the needs of its membership base. Below is a table summarizing some of the key products available at Costco.
| Product | Description |
|---|---|
| Groceries | A wide selection of dry groceries, fresh produce, deli items, and frozen foods, including organic options. |
| Electronics | Various consumer electronics such as televisions, computers, and home appliances at competitive prices. |
| Health & Beauty | Personal care items, health supplements, and beauty products, featuring both branded and private-label options. |
| Furniture | A range of furniture products for home and office, including living room sets, bedroom furnishings, and decor. |
| Clothing | Apparel for men, women, and children, including seasonal clothing and accessories. |
| Household Goods | Essential household items like cleaning supplies, kitchenware, and home improvement tools. |
| Automotive | Tires, batteries, and automotive accessories, along with tire installation services at select locations. |
| Pharmacy | Prescription medications, health consultations, and wellness products available in-store and online. |
| Optical | Vision care services, including eye exams, glasses, and contact lenses. |
| Gas Stations | Fuel services provided at Costco’s gas stations, often at lower prices compared to competitors. |
These products are designed to provide value and convenience to Costco members, making it a popular choice for bulk shopping and essential needs.
Main Competitors
The competitive landscape for Costco Wholesale Corporation is characterized by a mix of retail giants and established players in the discount store sector.
| Company | Market Cap |
|---|---|
| Walmart Inc. | 918B |
| Costco Wholesale Corporation | 397B |
| The Procter & Gamble Company | 335B |
| The Coca-Cola Company | 301B |
| Philip Morris International Inc. | 230B |
| Target Corporation | 42B |
| Dollar General Corporation | 29B |
| Dollar Tree, Inc. | 26B |
| BJ’s Wholesale Club Holdings, Inc. | 12B |
| Ollie’s Bargain Outlet Holdings, Inc. | 7B |
The main competitors of Costco operate primarily in North America, with Walmart being the largest competitor in the discount retail sector. Other notable players include Procter & Gamble and Coca-Cola, which also provide products within Costco’s inventory.
Competitive Advantages
Costco Wholesale Corporation (COST) maintains a strong position in the discount retail sector through its membership model, which fosters customer loyalty and repeat business. The company’s ability to offer high-quality branded and private-label products at competitive prices is a significant advantage. Looking ahead, Costco is poised to expand its product offerings into more categories, including organic and sustainable goods, and explore new international markets. These initiatives, combined with its robust e-commerce platform, present promising growth opportunities while reinforcing its market leadership.
SWOT Analysis
This analysis aims to evaluate Costco Wholesale Corporation’s strengths, weaknesses, opportunities, and threats to guide investment decisions.
Strengths
- Strong brand loyalty
- Diverse product range
- Robust financial performance
Weaknesses
- High dependence on membership fees
- Limited international presence
- Vulnerability to economic downturns
Opportunities
- Expansion in emerging markets
- E-commerce growth
- Increasing demand for organic products
Threats
- Intense competition
- Supply chain disruptions
- Regulatory challenges
Overall, Costco’s strengths and opportunities position it well for continued growth, but investors should remain cautious of its weaknesses and external threats that may impact its market performance. A strategic focus on expanding its e-commerce capabilities and international presence could enhance resilience against potential risks.
Stock Analysis
Over the past year, Costco Wholesale Corporation (COST) has exhibited significant price movements, showcasing a notable bullish trend despite recent fluctuations. The stock’s performance has been characterized by key dynamics that traders should monitor closely.
Trend Analysis
Analyzing the stock’s performance over the past two years reveals a substantial increase of 30.95%. This percentage change indicates a bullish trend for COST. However, it is essential to note the recent trend, which shows a decline of 5.94% from September 21, 2025, to December 7, 2025. The trend indicates a deceleration, and the stock’s volatility is reflected in the standard deviation of 96.95. Throughout the analyzed period, the highest price recorded was 1071.85, while the lowest was 683.24.
Volume Analysis
In the last three months, Costco’s trading volume has totaled approximately 1.2B shares, with buyer activity accounting for 56.61% of the total volume, indicating a buyer-driven market. The volume trend is increasing, suggesting that investor participation is growing, although recent data shows a shift towards seller dominance with buyer activity at 39.95% between September 21 and December 7. This shift may reflect varying sentiment among investors, highlighting the importance of monitoring future volume trends.
Analyst Opinions
Recent analyst recommendations for Costco Wholesale Corporation (COST) indicate a consensus rating of “Buy”. Analysts highlight the company’s strong return on equity (5) and return on assets (5), showcasing its efficient management and profitability. However, the price-to-earnings (1) and price-to-book (1) scores suggest some caution regarding valuation. Notable analysts, including those from major financial institutions, emphasize Costco’s potential for long-term growth, driven by its robust business model and expanding membership base. Overall, the sentiment remains positive for investors looking to add COST to their portfolios.
Stock Grades
Costco Wholesale Corporation (COST) has received consistent ratings from reputable grading companies, indicating a stable outlook in the current market environment.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| DA Davidson | Maintain | Neutral | 2025-12-04 |
| Telsey Advisory Group | Maintain | Outperform | 2025-12-04 |
| Telsey Advisory Group | Maintain | Outperform | 2025-12-01 |
| JP Morgan | Maintain | Overweight | 2025-11-06 |
| Telsey Advisory Group | Maintain | Outperform | 2025-11-06 |
| Telsey Advisory Group | Maintain | Outperform | 2025-11-04 |
| Oppenheimer | Maintain | Outperform | 2025-11-03 |
| Mizuho | Maintain | Neutral | 2025-10-09 |
| Argus Research | Maintain | Buy | 2025-09-29 |
| Citigroup | Maintain | Neutral | 2025-09-29 |
The overall trend in grades for COST shows a strong preference for maintaining current ratings, with multiple firms such as Telsey Advisory Group and Oppenheimer consistently rating the stock as “Outperform.” This reflects investor confidence, although some firms maintain a neutral stance, suggesting caution in the current market conditions.
Target Prices
The consensus target prices for Costco Wholesale Corporation (COST) indicate a favorable outlook among analysts.
| Target High | Target Low | Consensus |
|---|---|---|
| 1140 | 907 | 1037.5 |
Overall, analysts expect Costco’s stock to perform within the range of $907 to $1140, reflecting a strong consensus of $1037.5.
Consumer Opinions
Consumer sentiment about Costco Wholesale Corporation remains largely favorable, with many shoppers appreciating its value and selection.
| Positive Reviews | Negative Reviews |
|---|---|
| Offers great value for bulk purchases. | Membership fees can be a barrier for some. |
| Excellent customer service and support. | Limited product selection in certain areas. |
| High-quality products, especially groceries. | Long checkout lines during peak hours. |
Overall, consumer feedback indicates that while Costco excels in value and product quality, some shoppers express concerns about membership costs and occasional service delays.
Risk Analysis
In this section, I present a comprehensive overview of the potential risks associated with investing in Costco Wholesale Corporation (COST).
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Risk | Fluctuations in consumer spending affecting sales. | High | High |
| Supply Chain | Disruptions in supply chain logistics impacting inventory. | Medium | High |
| Competition | Increased competition from online retailers reducing market share. | High | Medium |
| Regulatory | Changes in regulations affecting operational costs. | Medium | Medium |
| Economic | Economic downturns leading to reduced consumer confidence. | High | High |
I see market risk and economic downturns as the most pressing concerns for COST, especially with recent inflationary pressures impacting consumer spending patterns.
Should You Buy Costco Wholesale Corporation?
Costco Wholesale Corporation (COST) shows a positive profitability outlook with a net income of 8.1B and a net profit margin of 2.94% for FY 2025. The company appears to create value as its return on invested capital (ROIC) at 19.44% exceeds its weighted average cost of capital (WACC) of 8.24%. With a manageable debt-to-equity ratio of 0.28 and total debt of 8.17B, Costco maintains solid fundamentals. It currently holds a rating of B, indicating a stable financial position, though the high price-to-earnings ratio of 51.71 may suggest overvaluation.
Favorable signals
In the evaluation of Costco Wholesale Corporation, several favorable elements stand out. The company has achieved a revenue growth of 8.17% and a gross profit growth of 10.14%. Additionally, ebit growth is strong at 10.73%, and the interest expense percentage is notably low at 0.06%. The return on equity is robust at 27.77%, and the return on invested capital is strong at 19.44%, indicating value creation.
Unfavorable signals
However, there are also unfavorable elements to consider. The operating expenses relative to revenue growth are unfavorable, matching the revenue growth at 8.17%. The price-to-earnings ratio is high at 51.71, which could be interpreted as overvaluation. The quick ratio is low at 0.55, suggesting potential liquidity issues, and the dividend yield is modest at 0.52%. Furthermore, the net margin is at 2.94%, which is unfavorable.
Conclusion
Considering the favorable income statement opinion and the favorable evaluation of ratios, the outlook for long-term investors might appear positive. However, with the recent seller volume exceeding buyer volume, it could be prudent to wait for buyers to return before making any investment decisions.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Costco Wholesale Corporation (COST): A Bull Case Theory – Yahoo Finance (Dec 04, 2025)
- Amundi Buys 194,262 Shares of Costco Wholesale Corporation $COST – MarketBeat (Dec 05, 2025)
- Will Costco (COST) Beat Estimates Again in Its Next Earnings Report? – Finviz (Dec 05, 2025)
- Costco Wholesale Corporation (COST): A Bull Case Theory – Yahoo Finance UK (Dec 04, 2025)
- Costco Wholesale Corporation (COST): A Bull Case Theory – Insider Monkey (Dec 04, 2025)
For more information about Costco Wholesale Corporation, please visit the official website: costco.com
