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what it is
Costco sells bulk groceries and household goods to paying members through 914 warehouses worldwide.
how it gets paid
Last year Costco Wholesale made $275.2B in revenue. Food and sundries was the main engine at $112.8B, or 41% of sales.
why it's growing
Revenue grew 8.2% last year. Costco members prioritize value and quality and exhibit consistent shopping patterns.
what just happened
Costco posted $5.87 in quarterly EPS, a penny above estimates, which tells you the machine is still executing.
At a glance
A+ balance sheet — rock-solid finances — built to survive anything
100/100 earnings predictability — you can trust these numbers
48.1x trailing p/e — you're paying up for this one
0.6% dividend yield — cash in your pocket every quarter
25.0% return on capital — every dollar works hard here
xvary composite: 81/100 — above average
What they do
Costco sells bulk groceries and household goods to paying members through 914 warehouses worldwide.
You feel Costco's edge in your cart. Kirkland Signature saves shoppers 15% to 20% versus national brands, and that price gap keeps members coming back when households trade down to cheaper proteins. Scale does the rest: Costco runs 914 warehouses, while long-term debt is only $5.7B, or 1% of capital.
How they make money
$275.2B
annual revenue · their business grew +8.2% last year
Food and sundries
$112.8B
Non-foods
$71.5B
Fresh foods
$35.8B
Softlines
$30.3B
Ancillary and other
$24.8B
The products that matter
membership economics
membership fees
$4.6B · +10.2%
this is only 1.7% of revenue, but it is the recurring stream that makes a 3.5% net margin model work.
93% renewal
core retail engine
merchandise sales
$270.6B · 98.3% of revenue
it is almost the entire business, and it grew 7.9% despite running on just 11% merchandise margin.
bulk value
private-label pricing weapon
Kirkland Signature
15%–20% savings
the data here is thin, but the role is clear: 15%–20% savings versus national brands gives shoppers one more reason to renew at 93%.
loyalty driver
Key numbers
48.1x
trailing p/e
P/E ratio → how many dollars you pay for one dollar of profit → so what: Costco needs to stay near-perfect to justify this price.
25.0%
return on capital
Return on capital → profit earned on money used in the business → so what: Costco turns each investment dollar into unusually strong earnings.
4.8%
operating margin
Operating margin → profit left after running the business → so what: this is a volume machine, not a fat-margin machine.
1%
debt to capital
Debt to capital → how much of the business is financed with debt → so what: the balance sheet gives Costco room to stay calm in a downturn.
Financial health
A+
strength
- balance sheet grade A+ — near the highest rating possible
- risk rank 1 — safer than 95% of stocks
- price stability 90 / 100
- long-term debt $5.7B (1% of capital)
- net profit margin 3.5% — keeps 4 cents of every dollar in revenue
- return on equity 28% — $0.28 profit for every $1 investors have put in
A+ with balance sheet grade and risk rank standing out. your money faces less risk here than at most public companies.
Total return vs. market
You invested $10,000 in COST 3 years ago → it's now worth $20,260.
The index would have given you $14,770.
source: institutional data · total return
What just happened
beat estimates
Costco posted $5.87 in quarterly EPS, a penny above estimates, which tells you the machine is still executing.
Quarterly EPS rose from $5.29 to $5.87 vs. prior year, while full-year EPS climbed from $16.56 to $18.21. Annual revenue reached $275.2B, up 8.2%, so the story was the usual one: more sales, a little more profit, no drama.
$62.2B
revenue
$5.87
eps
4.8%
op margin
the number that mattered
Full-year EPS rose 10.0% to $18.21, and that matters more than the 1-cent beat because this stock is priced for steady, repeatable growth.
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this lag was not caused by a business failure but by a valuation reset.the stock entered the year trading at a massive 60x p/e ratio, higher than many ai growth giants, and leaving no room for error. as the ‘‘sell the news’’ effect took hold following the september membership fee hike and investors rotated into higher-growth sectors, costco’s multiple compressed toward 45x. in effect, the stock is taking a breather, waiting for its actual earnings to catch up to its premium price tag.
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costco members prioritize value and quality and exhibit consistent shopping patterns.
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there is a notable trade down to lower-cost proteins such as poultry and ground beef, though highercost beef cuts still grow.
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shoppers are increasingly embracing the kirkland signature brand for its 15% to 20% savings over national brands.
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while non-food growth has slowed, consumers are responding well to newness and digital convenience.costco is currently leveraging aggressive technology integration to drive operational productivity and long-term membership loyalty.
source: company filings, 2025
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What could go wrong
the top risk is the membership model losing some of its pricing power. this company earns a premium valuation because 133M members renew at 93% and keep fee income growing faster than the rest of the business.
high
membership saturation in north america
93% renewal is excellent, but it also means most of the easy retention work is already done. if new member adds slow, growth has to come from warehouse expansion and fee hikes.
with membership fees at $4.6B and growing 10.2%, any slowdown here would hit the cleanest profit stream first.
med
wage pressure on a 4.8% operating margin
costco pays well, which helps the brand and the service model. it also means labor inflation lands on a business with only 4.8% operating margin.
thin-margin retail gives you less room to absorb cost pressure than the stock’s 48.1x multiple suggests.
med
e-commerce mix can dilute store economics
online sales are convenient, but they usually carry lower margins than a customer doing the work inside the warehouse. digital growth is useful until it starts leaning on profitability.
if more revenue shifts online while merchandise margin stays around 11%, the blended margin picture gets tighter.
med
valuation compression can overpower good execution
the business can keep performing and the stock can still stall if investors stop paying nearly 50x earnings for a retailer. the recent move from around 60x toward 45x already showed you how that works.
this is the risk of owning quality at a premium price: the fundamentals can hold up while the multiple does the damage.
a 3.5% net margin business trading at 48.1x earnings does not need an operational disaster to disappoint you. it only needs renewal, fee growth, or margin resilience to look a little less exceptional.
source: institutional data · regulatory filings · risk analysis
Pay attention to
key metric
membership fee growth vs. merchandise growth
membership fees grew 10.2% last year and 14% in the latest quarter. if that stops outpacing merchandise growth, the cleanest part of the story is slowing.
trend
renewal rates holding at 93%
93% is the number carrying the premium narrative. if that rate starts slipping, you will feel it in both sentiment and the multiple.
calendar
next fee-hike cycle
the last increase moved the annual fee from $60 to $65. another hike would test pricing power and could add meaningfully to a $4.6B revenue stream.
risk
operating margin staying near 4.8%
this business wins by being efficient, not by having fat margins. if wage pressure or digital mix pushes margin lower, the stock’s room for error shrinks fast.
Analyst rankings
earnings predictability
100 / 100
management has been unusually reliable. in human-speak, analysts trust this company to do roughly what it says it will do.
risk profile
1 / safest tier
risk rank 1 means it screens safer than most of the market. that lowers business risk, not valuation risk.
source: institutional data
Institutional activity
institutions have been net buying for 2 consecutive quarters — 1,763 buyers vs. 1,716 sellers in 3q2025. total institutional holdings: 0.3B shares. net buying for 2 quarters.
source: institutional data
Price targets
3-5 year target range
$772
$1447
$876
current price
$1260
target midpoint · +44% from current · 3-5yr high: $1385 (+60% · 13% ann'l return)
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