{"id":24480,"date":"2025-06-26T23:56:00","date_gmt":"2025-06-26T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=24480"},"modified":"2025-06-27T07:53:00","modified_gmt":"2025-06-26T23:53:00","slug":"costcos-valuation","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/","title":{"rendered":"Why is Costco\u2019s valuation so staggering?"},"content":{"rendered":"\n<p>Taiwanese investors have an inexplicable fondness for Costco. Going to Costco has become a national sport and they invest crazily in Costco stocks.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Preface\" >Preface<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Three_facts_to_remember\" >Three facts to remember<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Amazing_business_model\" >Amazing business model<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Growth_opportunities_remain_huge\" >Growth opportunities remain huge<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#The_stock_price_is_too_amazing\" >The stock price is too amazing<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Unrivaled_competitiveness\" >Unrivaled competitiveness<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Customer_Loyalty\" >Customer Loyalty<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Attractive_product_prices\" >Attractive product prices<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Branded_advantages\" >Branded advantages<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Continued_good_performance\" >Continued good performance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Profit_comes_from_members_fee\" >Profit comes from members fee<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Capital_market_performance\" >Capital market performance<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Disadvantages_of_its_stock\" >Disadvantages of its stock<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Price_vs_value\" >Price vs. value<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Valuation\" >Valuation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Share_price_return\" >Share price return<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Is_the_premium_too_high\" >Is the premium too high?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Preface\"><\/span>Preface<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Before discussion of Costco\u2019s valuation, as a reminder, it\u2019s best to read my other two previous posts about Costco before reading this article:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li> &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/27\/costco-moats-difference\/\" target=\"_blank\" rel=\"noreferrer noopener\">Costco&#8217;s moats, and the Differences from Other Competitors<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/02\/02\/how-costco-make-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Costco make money?<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p>Costco (ticker: COST) has been one of the better-performing non-tech stocks in the US stock market in the past few years. The warehouse retailer has thrived through all phases of the pandemic and its aftermath, first by handling record traffic as shoppers stocked up on essentials, and then by posting stunning sales growth as revenue soared. Costco has also experienced less growth hangover than its peers in the post-lockdown period.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Three_facts_to_remember\"><\/span>Three facts to remember<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Amazing_business_model\"><\/span>Amazing business model<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The first step for investors to understand a listed company is to understand its business model. This is a bit tricky for Costco investors.<\/p>\n\n\n\n<p>Costco has about 600 warehouse stores in the United States and nearly 900 worldwide. These stores sell food, electronics, appliances, and more. With annual net sales of more than $200 billion, one might think that&#8217;s its business, just like other retail chains, but it&#8217;s not as simple as you think.<\/p>\n\n\n\n<p>In fact, from a general business operations perspective, Costco&#8217;s retail business can barely break even because it tries to provide low-priced goods to please its members rather than increase the company&#8217;s profits. As the main consideration\u2500\u2500\u2500this subverts the logic of business operations and the fundamental way of corporate survival. It seems unreasonable, but Costco has done it and done it well. That&#8217;s why the company goes to great lengths to keep the price of its famous hot dog combo at $1.50, for example. This is about getting customers what they want as cheaply as possible.<\/p>\n\n\n\n<p>However, the Costco shopping experience isn&#8217;t for everyone\u2014it&#8217;s only open to paying members. That&#8217;s the company&#8217;s real business: selling memberships. Those memberships account for about three-quarters of its profits. Therefore, it is imperative for Costco shareholders to monitor membership growth and renewal rates.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Growth_opportunities_remain_huge\"><\/span>Growth opportunities remain huge<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Costco expects to open 31 net new stores in fiscal 2024, which begins in September 2023, compared with just 23 in fiscal 2023. That&#8217;s a pretty modest single-digit growth rate. Still, management said on the earnings call that new U.S. store openings still accounted for more than 50% of new store openings, exceeding current expectations.<\/p>\n\n\n\n<p>Encouragingly, Costco is seeing more domestic business opportunities than expected. Additionally, the company remains focused on international expansion. For example, it is about to open its sixth store in China&#8211;no one doubts that China&#8217;s huge market can open more stores in the future.<\/p>\n\n\n\n<p>Costco has a consistent and reliable business model in a fairly familiar retail industry. If you factor in its growing e-commerce sales and its expansion both stateside and internationally, you&#8217;ll see there&#8217;s plenty of room for growth ahead.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_stock_price_is_too_amazing\"><\/span>The stock price is too amazing<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Costco has a great business model and still has opportunities to grow. But the most important thing investors need to know is that &#8220;Costco stock is not cheap at all.&#8221; In fact, from a price-to-earnings perspective, Costco stock is trading at the most expensive price in more than 20 years, at a premium of about 70% to its 20-year average premium.<\/p>\n\n\n\n<p>The late great Charlie. Charlie Munger loved Costco&#8217;s business, and it was one of only three stocks he directly owned (see my post &#8220;Charlie Munger, the Great Investor Worth Remembering&#8221; for details) ), despite being a well-known value investor. Therefore, he is willing to own a stock with a high valuation because of its good quality. This is something to remember. But as he once lamented to CNBC, &#8220;The problem with Costco is that it trades at 40 times earnings.&#8221;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Unrivaled_competitiveness\"><\/span>Unrivaled competitiveness<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Customer_Loyalty\"><\/span>Customer Loyalty<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Everything starts from the customer&#8217;s perspective to gain customer loyalty. As of the third quarter of 2023 as of May 7, for example, Costco&#8217;s membership fee revenue exceeded US$1.4 billion, accounting for nearly 2% of sales. This is up from $984 million in the third quarter of 2022, which represented 1.9% of sales. <a href=\"https:\/\/www.retailtouchpoints.com\/topics\/customer-experience\/costco-delays-membership-fee-hike-as-member-growth-continues\" target=\"_blank\" rel=\"noreferrer noopener\">Costco also announced a membership renewal rate of 92.6% in the United States and Canada and a global membership renewal rate of 90.5%<\/a>, both tied with the renewal rate in the second quarter of 2023.<\/p>\n\n\n\n<p>The number of new members is also increasing, with 69.1 million paying family members and 124.7 million cardholders at the end of the third quarter of 2023, both up 7% from the same period last year. That includes 31.3 million paying members and its more expensive corporate cards, accounting for 45% of total members and 73% of global sales.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Attractive_product_prices\"><\/span>Attractive product prices<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Costco appears to have become a favorite and frequented shopping destination for its growing membership base. So it&#8217;s highly likely that it will continue to set new sales and profit records going forward, regardless of the consumer spending environment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Branded_advantages\"><\/span>Branded advantages<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These victories highlight Costco&#8217;s valuable competitive assets. It relies on low product prices, excellent service, and customer loyalty to build Costco&#8217;s powerful, priceless brand advantage that is difficult for competitors to imitate.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Continued_good_performance\"><\/span>Continued good performance<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Although Costco&#8217;s sales are unlikely to have a double-digit percentage growth rate due to the law of large numbers, it is one of the very few U.S.-listed retail companies willing to announce its sales performance every month. This fully proves that Costco is very confident in its business performance, and it indeed shows that it has this ability.<\/p>\n\n\n\n<p>Despite recent market concerns about weakening financial health of U.S. consumers, Costco tends to be more resilient during economic downturns due to its membership model and the fact that it serves many higher-income customers.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Profit_comes_from_members_fee\"><\/span>Profit comes from members fee<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>This is not only one of the anomalies among the companies listed on the US stock market, but it is probably rare in the world that can survive only relying on the annual membership fees paid by customers, and can also operate the company in a sound and impressive manner, causing all walks of life to A very small number of companies are competing to imitate its successful model.<\/p>\n\n\n\n<p>Costco is a retailer, which means investors will want to focus on comparable store sales for signs that the business is on track. However, I will stress again that Costco&#8217;s long-term returns are closely tied to its membership metrics. Because the business makes most of its revenue from members: membership fees account for about three-quarters of its profits. Importantly, its renewal rates continue to climb to record levels.<\/p>\n\n\n\n<p>In 2023, Costco renewed memberships in 93% of its members in its core U.S. market. This number confirms that Costco is providing a lot of value to its members, and its bottom line is likely to continue to climb steadily. Costco&#8217;s fiscal 2023 operating profit was $8.1 billion, compared with $4.7 billion in 2019.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Capital_market_performance\"><\/span>Capital market performance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disadvantages_of_its_stock\"><\/span>Disadvantages of its stock<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>However, there are a few factors that could weigh on the stock in the coming years. Wall Street is excited about the upcoming membership fee hike, but may be disappointed to see the hike translate into only modest earnings growth.<\/p>\n\n\n\n<p>It&#8217;s been more than five years since it last raised annual membership fees, and by many accounts, Costco should. But management prefers to use almost all the extra cash generated by government stimulus measures to lower prices rather than improve profitability.<\/p>\n\n\n\n<p>On the bright side, this approach means shareholders don&#8217;t have to endure the year-to-year earnings swings that are common at retailers like Target Stores (ticker: TGT ). The downside is that even in good times, Costco&#8217;s profit margins tend to remain low, around 3% of sales.<\/p>\n\n\n\n<p>Investors may also be disappointed with the chain&#8217;s cash returns over the next few years. Rather than committing to generous annual dividends like Walmart (ticker: WMT) , Costco returns most of its cash to investors in unpredictable, sporadic payments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Price_vs_value\"><\/span>Price vs. value<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The big question is whether this success will lead to market-beating returns for patient investors. Unfortunately, its stock is expensive. Costco stock is valued at 1.3 times annual sales, its highest premium in the past decade.<\/p>\n\n\n\n<p>You could buy Target at 0.6x sales, or Wal-Mart at 0.7x revenue. Amazon (US: AMZN ) also appears to be worth a relative value of 3x sales, given rising profitability and lots of potential for growth.<\/p>\n\n\n\n<p>Since it&#8217;s outperforming its retail peers, with growth and stable cash flow clearly ahead of its competitors, Costco stock should still perform well compared to its retail peers. But given the stock&#8217;s current expensive valuation, investors should temper their expectations for short-term returns.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Valuation\"><\/span>Valuation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The price-to-earnings ratio can provide investors with a good gauge to determine whether valuations are indeed accelerating too quickly. The stock has traded at an average price-to-earnings ratio of less than 56 times over the past decade. Today, the stock trades at a price-to-earnings ratio of more than 49 times. Investors are paying a huge price-to-earnings ratio for the stock.<\/p>\n\n\n\n<p>Costco&#8217;s valuation has always been higher than that of most high-tech stocks. This is one of the many miracles on Wall Street, and this phenomenon has existed for a very long time. If there are no accidents, it will continue to happen again in the foreseeable future. continued.<\/p>\n\n\n\n<p>In Costco&#8217;s long history as a public company, its trailing-12-month P\/E ratio has never been as high as it has recently.<\/p>\n\n\n\n<p>All I can say is, don\u2019t use ordinary retail or general industries to explain its valuation. Costco&#8217;s valuation phenomenon in the retail industry should be comparable only to Amazon.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Share_price_return\"><\/span>Share price return<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The following is the return on the stock price of Costco and its competitors over the past one and five years as of February 16, 2024, as well as other important stock price valuation figures.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>Stock<\/td><td>Share Price<\/td><td>Return in past 5 years<\/td><td>Return in past 1 year<\/td><td>P\/E<\/td><td>Dividend Yield<\/td><td>Market Capitalization (US$ billion)<\/td><\/tr><tr><td>Costco<\/td><td>723.99<\/td><td>234.71%<\/td><td>44.30%<\/td><td>49.37<\/td><td>0.56%<\/td><td>321.25<\/td><\/tr><tr><td>Target<\/td><td>149.61<\/td><td>107.07%<\/td><td>-9.99%<\/td><td>19.06<\/td><td>2.94%<\/td><td>69.07<\/td><\/tr><tr><td>Walmart<\/td><td>170.36<\/td><td>71.13%<\/td><td>15.63%<\/td><td>28.28<\/td><td>1.34%<\/td><td>458.65<\/td><\/tr><tr><td>Amazon.com<\/td><td>169.51<\/td><td>107.78%<\/td><td>79.22%<\/td><td>58.46<\/td><td>0%<\/td><td>1,760<\/td><\/tr><tr><td>S&amp;P 500<\/td><td>5005.57<\/td><td>79.24%<\/td><td>25.22%<\/td><td>23.27<\/td><td>1.47%<\/td><td>40,040.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_the_premium_too_high\"><\/span>Is the premium too high?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>High P\/E multiples are not uncommon for rapidly growing companies. But the crux of the matter is that Costco&#8217;s growth rate has slowed significantly in recent years, and it is below its 10-year average. Generally speaking, when revenue growth exceeds 20%, it&#8217;s probably acceptable to think that premiums for retail stocks are likely to be higher.<\/p>\n\n\n\n<p>There&#8217;s only one possible explanation for Costco&#8217;s current apparently high and unreasonably high stock price valuation: Investors clearly believe this is the exception, not the norm, for Costco.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Costco is doing great business. It plans to open more stores, its membership prices may soon rise again, and there&#8217;s little concern that the business has exhausted its growth opportunities. Costco may be a good long-term buying opportunity, but at its current price-to-earnings ratio, investors are paying a lot for future earnings growth.<\/p>\n\n\n\n<p>If you want to stick with it for decades, it&#8217;s still a good investment for you. But it&#8217;s not a stock I would buy today, simply because there are better deals on the market today and the potential for greater upside in the near future.<\/p>\n\n\n\n<p>I would consider investing in Costco if it traded below 40x P\/E, but at today&#8217;s valuation it&#8217;s increasingly difficult to justify the price. While Costco isn&#8217;t necessarily a bad investment, there are better long-term options for investors. After all, this isn\u2019t the growth opportunity that it was in the 1980s.<\/p>\n\n\n\n<p>That said, I&#8217;m waiting for a a better share price.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"102\" height=\"58\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/02\/cost-1600x1200-1.jpg\" alt=\"Costco\u2019s valuation\" class=\"wp-image-24534\"\/><\/figure>\n\n\n\n<p><strong><em>I am the author of the original text, the essence of this story was originally featured on Smart Magazine<\/em><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/26\/costcos-valuation\/\">Why is Costco\u2019s valuation so staggering? <\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/29\/walmart\/\" target=\"_blank\" rel=\"noreferrer noopener\">Walmart, the real retail overlord, how it makes money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/27\/costco-moats-difference\/\" target=\"_blank\" rel=\"noreferrer noopener\">Costco&#8217;s moats, and the Differences from Other Competitors<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/02\/02\/how-costco-make-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Costco make money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/05\/21\/poor-charlies-almanack\/\" target=\"_blank\" rel=\"noreferrer noopener\">Munger&#8217;s most important work &#8220;Poor Charlie&#8217;s Almanack&#8221;<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/27\/charlie-munger\/\">Charlie Munger, a great investor worth remembering<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/04\/09\/williams-sonoma-surged\/\">Upscale retailer Williams-Sonoma, stock surged in recent years, What\u2019s special?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/16\/amazon-vs-alibaba\/\" target=\"_blank\" rel=\"noreferrer noopener\">Amazon vs. Alibaba<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/10\/amazons-economic-scale\/\" target=\"_blank\" rel=\"noreferrer noopener\">Amazon\u2019s dominance by its economic scale, impact share price of PayPal, Affirm, Fair Isaac, Visa, and Mastercard<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/29\/walmart\/\" target=\"_blank\" rel=\"noreferrer noopener\">Walmart, the real retail overlord, how it makes money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/02\/02\/how-costco-make-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Costco make money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/10\/03\/dollar-general-dollar-tree\/\">Dollar General vs. Dollar Tree<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Don\u2019t use ordinary retail or general industries to explain its valuation. Costco&#8217;s valuation phenomenon in the retail industry should be comparable only to Amazon.<\/p>\n","protected":false},"author":1,"featured_media":24534,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[128,1224,494,15,1223,346,343],"tags":[227,215,217,219],"class_list":["post-24480","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-retail","category-attractive-price","category-branding-advantage","category-charlie-munger","category-customer-loyalty","category-pe-ratio","category-stock-valuation","tag-amzn","tag-cost","tag-tgt","tag-wmt"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/24480","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=24480"}],"version-history":[{"count":27,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/24480\/revisions"}],"predecessor-version":[{"id":37109,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/24480\/revisions\/37109"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/24534"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=24480"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=24480"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=24480"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}