Should you buy Costco stock? (June 2024)

Published first at Costco stock analysis. Ticker: $COST Costco is one of the best businesses in the world. Over the last 20 years the stock has gone up over 3000%, which is an annualized return of nearly 19% including dividends. And the stock just hit another all-time high. At the current price, Costco now has a market value of 368 billion dollars. Revenue over the last 12 months comes to 254 billion with 7.2 billion of net income and 7.4 billion of free cash flow. So Costco stock is now valued at 1.4 times revenue and 51 times earnings. To put that into perspective, if you bought Costco today, and earnings stayed flat, it would take you more than 50 years to see a return on investment. That’s a rich valuation, so it’s worth considering why investors continue to pay such a high multiple. The simple answer is that Costco has built a reputation as one of the best businesses in the world and investors are happy to pay up for quality. A longer answer is that Costco still has room to grow its business and increase its margins. The company thinks it can open 30 new warehouses a year, both in the US and abroad, which can provide a rough 3% boost to annual revenue growth. And Costco has ample room to increase prices and membership fees in the face of inflation with higher membership fees dropping almost entirely to the bottom line. #investing #3mb #stocks #costcostock