Costco Wholesale Corp (COST) stock analysis

P/E above its 5-year median

Costco Wholesale's P/E of 52.4 is above its own 5-year median of 47.9.

P/E above the industry

Costco Wholesale's P/E of 52.4 is above the Variety Stores median of 22.5.

EV/EBITDA above its 5-year median

Costco Wholesale's EV/EBITDA of 32.5 is above its 5-year median of 29.4.

P/B above the industry

Costco Wholesale's price-to-book of 13.46 is above the Variety Stores median of 5.57.

Trading above fair value

The share price of $1087.61 is above our fair value estimate of $656.37.

Margin of safety under 20%

The price is 65.7% above fair value, so there is no margin of safety.

Revenue growing under 10% a year

Revenue grew 7.8% a year over the last three fiscal years, short of the 10% we look for.

EPS growing 10%+ a year

Diluted EPS grew 13.6% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 13.9% over the last twelve months, against a 5-year average of 13.0% a year.

Growing faster than the industry

Revenue grew 10.1% over the last twelve months; the Variety Stores median is 9.6%.

Company guidance

No outlook found in earnings releases from the last twelve months.

Gross margin slipping

Gross margin was 12.8% over the last twelve months, against 12.8% a year earlier.

Return on equity over 15%

Return on equity was 28.4% over the last twelve months and averaged 29.5% over five years.

Return on capital over 10%

Return on invested capital was 45.8%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Costco Wholesale's return on equity of 28.4% is above the Variety Stores median of 24.9%.

Earnings grew over 5 years

Net income grew 13.0% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 3.0% over the last twelve months, against a 5-year average of 2.8%.

Net margin below the industry

Costco Wholesale's net margin of 3.0% is below the Variety Stores median of 4.0%.

Low debt

Debt is 17.2% of shareholders' equity, under the 40% we consider low.

Debt falling against equity

Debt to equity fell from 42.6% five years ago to 17.2%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 257% of total debt.

Interest well covered

Operating income covers interest expense 80.6 times.

Short-term assets cover short-term debts

Current assets are 1.06 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 9.75; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Costco Wholesale paid dividends worth 0.5% of the share price over the last twelve months.

Yield below Treasuries

The 0.5% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Costco Wholesale yields 0.5%.

Dividend was cut

The dividend per share fell by more than 10% at least once in the last 7 fiscal years.

Covered by earnings

Dividends take 26.6% of net income.

Covered by free cash flow

Dividends take 26.2% of free cash flow.