Oh Come On!
Investor, Venture Capital Background
Costco's premium multiple looks unsustainable, at 40 times next-twelve-month earnings with EPS growing only about 10%. Stocks with PEG ratios like that are not worth owning, as multiple cuts at former compounders such as FICO and Intuitive Surgical showed. x.com x.comÂ
Costco is hard to justify at more than 40 times forward earnings while earnings grow only in the low teens. It behaves more like a sticky, mature subscription business than a traditional retailer, but that does not support the multiple. x.comÂ
Costco is a wonderful execution story whose business only gets better through consumer pain. Its Kirkland brand is more valuable than 90% of consumer brands today. The stock has been too expensive this cycle, and not owning it in size was a mistake; it is worth owning, though the right entry level is unclear. Sysco's moves illustrate the deeper transformation underway. x.comÂ
Costco is an amazing company, but at roughly 40x forward earnings its stock is pricing in a lot of perfection. x.comÂ
Costco stock cannot be expected to make major gains soon at 40x earnings with only low double-digit growth. The company keeps executing well, yet the stock has been flat over the last two years. x.comÂ
Costco is the preferred hedge against OpenAI's much higher valuation relative to revenue. Costco's cited $441B valuation comes with $275B revenue, versus OpenAI's $1.4T valuation and $50B revenue. x.comÂ
Costco already looks quite overvalued, with a forward P/E that is crazy high. x.comÂ
Costco deserves to go nowhere at a 40+ P/E, a valuation that is simply too high for even a well-loved business. x.comÂ
Costco is one of the few businesses likely to keep growing around 10% for the next 10-15 years, which makes a large drawdown doubtful. It has a large growth runway outside the US and Canada, with Asia especially promising, very low membership churn, and scale economies shared with members, so it grows more efficient as it expands. An aging population also helps. x.com x.com x.comÂ
Costco looks overvalued at about 50 times earnings, one of a few pockets of dumb behavior alongside CrowdStrike, Tesla and Arm, though true bubbles are rare outside a few areas. The key for the market will be breadth: whether stocks left out of this cycle lift the market as the leaders correct. x.comÂ