Now Is Not The Time To Buy Costco Wholesale Stock

We believe there is a near-equal mix of good and bad in COST stock given its overall Moderate operating performance and financial condition. But keeping in mind its Very High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $407 Bil in market cap, Costco Wholesale provides membership warehouse retail services across multiple countries, offering groceries, sundries, liquor, pharmacies, opticals, food courts, hearing aids, and tire installation centers.

[1] Valuation Looks Very High

This table highlights how COST is valued vs broader market. For more details see: COST Valuation Ratios

[2] Growth Is Moderate

• Costco Wholesale has seen its top line grow at an average rate of 7.3% over the last 3 years
• Its revenues have grown 5.9% from $254 Bil to $269 Bil in the last 12 months
• Also, its quarterly revenues grew 8.0% to $63 Bil in the most recent quarter from $59 Bil a year ago.

This table highlights how COST is growing vs broader market. For more details see: COST Revenue Comparison

[3] Profitability Appears Very Weak

• COST last 12 month operating income was $10 Bil representing operating margin of 3.8%
• With cash flow margin of 4.6%, it generated nearly $12 Bil in operating cash flow over this period
• For the same period, COST generated nearly $7.8 Bil in net income, suggesting net margin of about 2.9%

This table highlights how COST profitability vs broader market. For more details see: COST Operating Income Comparison

[4] Financial Stability Looks Very Strong

• COST Debt was $8.2 Bil at the end of the most recent quarter, while its current Market Cap is $407 Bil. This implies Debt-to-Equity Ratio of 2.0%
• COST Cash (including cash equivalents) makes up $15 Bil of $75 Bil in total Assets. This yields a Cash-to-Assets Ratio of 19.7%

[4] Downturn Resilience Is Strong

COST has been more resilient than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• COST stock fell 31.5% from a high of $608.05 on 7 April 2022 to $416.43 on 20 May 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 7 December 2023
• Since then, the stock increased to a high of $1,076.86 on 13 February 2025 , and currently trades at $915.95

 
2020 Covid Pandemic

• COST stock fell 13.6% from a high of $324.08 on 20 February 2020 to $279.85 on 12 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 9 July 2020

 
2008 Global Financial Crisis

• COST stock fell 48.5% from a high of $74.66 on 8 July 2008 to $38.44 on 9 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 February 2011

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read COST Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.