Bill 'Latency Lord' Brennan
Fundamental Growth Investor, B2B/Sector Leaders & Picks-and-Shovels
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
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 already looks quite overvalued, with a forward P/E that is crazy high. 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 and Walmart's valuations have diverged from most US food and beverage stocks. Most of the group trades near 20-year valuation lows, while these two have entered a mini-bubble. x.comÂ
Costco's slow growth in a finite market does not justify 30x earnings. It is a good model, but new members joining to buy in bulk to save money is not the strength bulls think it is. 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 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 doesn't follow the stage 3 to stage 4 breakdown that pattern traders expect, because its fundamentals don't allow it and institutions are willing to pay a premium valuation for its stability. That replies to @ohiain, who notes Costco hit fresh all-time highs as institutional money rotates back toward defensive leadership. 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
