A strong performer from today's evening trading session is Costco Wholesale, whose shares rose 3.4% to $681.24 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Costco Wholesale Has Elevated P/B and P/E Ratios:
Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, Costco Wholesale has a trailing 12 month P/E ratio of 46.4 and a P/B ratio of 11.56.
Costco Wholesale's PEG ratio is 5.18, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues With Increasing Reinvestment in the Business:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $141,576 | $152,703 | $166,761 | $195,929 | $226,954 | $242,290 |
| Revenue Growth | n/a | 7.86% | 9.21% | 17.49% | 15.83% | 6.76% |
| Operating Margins | 3% | 3% | 3% | 3% | 3% | 4% |
| Net Margins | 2% | 2% | 2% | 3% | 3% | 3% |
| Net Income (MM) | $3,179 | $3,704 | $4,059 | $5,079 | $5,915 | $6,292 |
| Net Interest Expense (MM) | $159 | $178 | $160 | $171 | $205 | $533 |
| Depreciation & Amort. (MM) | $1,437 | $1,492 | $1,645 | $1,781 | $1,900 | $2,077 |
| Earnings Per Share | $7.09 | $8.26 | $9.02 | $11.27 | $13.14 | $14.16 |
| EPS Growth | n/a | 16.5% | 9.2% | 24.94% | 16.59% | 7.76% |
| Diluted Shares (MM) | 442 | 443 | 444 | 444 | 445 | 444 |
| Free Cash Flow (MM) | $2,805 | $3,358 | $6,051 | $5,370 | $3,501 | $6,745 |
| Capital Expenditures (MM) | $2,969 | $2,998 | $2,810 | $3,588 | $3,891 | $4,323 |
| Current Ratio | 1.02 | 1.01 | 0.98 | 1.02 | 1.03 | 1.07 |
| Total Debt (MM) | $7,557 | $7,723 | $9,470 | $7,466 | $6,543 | $6,458 |
| Net Debt / EBITDA | 0.13 | -0.21 | -0.58 | -0.62 | -0.44 | -0.69 |
Costco Wholesale has growing revenues and increasing reinvestment in the business and low leverage. Additionally, the company's financial statements display a strong EPS growth trend and irregular cash flows. However, the firm has weak operating margins with a stable trend.
