Are You Overpaying For Costco Stock Versus Its Rivals?

Costco Wholesale (COST) stock carries the highest price against earnings in a group of six large retailers that includes Walmart and Amazon. The company ranks just fifth out of the six on operating margin, although it sits second on revenue growth. So how much more are you paying for Costco, and what do you get for it?

Costco Is Priced Above Amazon But Grows Slower

Costco stock trades at 47.9 times its earnings, more than double Amazon’s multiple of 20.9. Amazon’s $135 billion of net income sits above its $93.7 billion of operating income, which pulls its multiple down. Even so, Amazon grows faster and earns a wider margin. Its revenue grew 15.8% over its latest four quarters, compared with 10.1% for Costco. Amazon also posted a 12.1% operating margin, against 3.9% for Costco. The two companies are classed differently, with Amazon as a broadline retailer and Costco as a consumer staples merchandise retailer, so part of both gaps may come from how each business is built.

Setting Amazon aside, Costco’s premium lines up with its growth. Walmart operates in the same industry, trades at 42.8 times earnings and grew revenue 6.2%. Walmart, Target and Home Depot all sit below Costco on both price and growth.

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How Costco Makes Money On A Thin Margin

Costco sells goods to its members at low prices. Management said on the September 24 call that Kirkland Signature items save members at least 15% to 20% against national brands. Members also pay a fee to shop there. That membership fee income was $1.849 billion in fiscal Q4, equal to nearly half of Costco’s $3.8 billion operating income for the quarter.

Members keep coming back, too. In the U.S. and Canada, 92.3% of members renewed at the end of fiscal Q4. That steady fee income, rather than the thin margin on the goods themselves, may be what buyers of the stock are paying extra for.

Can Costco Keep Growing Revenue This Fast?

Costco has kept speeding up so far. Revenue grew 5.0% in fiscal 2024 and 8.2% in fiscal 2025, before reaching the faster pace of fiscal 2026. Some of the latest growth came from fuel, however: management said higher gas prices added about 3% to fiscal Q4 sales.

Costco plans about $7.5 billion of capital spending in fiscal 2027, against $6.4 billion in fiscal 2026. Management said the increase comes mainly from new warehouses, as Costco targets 30 net new openings a year.

Membership is growing more slowly than sales. Paid members rose 3.8% from a year earlier at the end of fiscal Q4. Management said on the call that the growth rate of recent quarters is probably typical of what to expect. Costco’s next quarterly report is expected on or around December 10, 2026.

The price appears to assume that Costco keeps growing faster than Walmart and its other store rivals while its members keep renewing, even though Amazon grows faster at a lower multiple. Costco’s revenue so far supports that, with some help from gas prices, while management expects member growth to stay near its recent pace. Paid membership growth in the December report is the number to watch.

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