GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
Costco is expensive against its earnings, at 46x trailing and 37x next year's earnings versus the 18x its industry usually gets. At 18x next year's $24.95 EPS, give or take 12%, fair value is about $395-503, leaving the $922.81 price 83% above the high end. This is a valuation screen only, with no fundamental work. 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 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 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 is an amazing company, but at roughly 40x forward earnings its stock is pricing in a lot of perfection. 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 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'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 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 is very overvalued, while Nvidia is undervalued. Per @charliebilello, Costco trades at 45 times forward earnings, Walmart at 36 and Nvidia at 17. A high multiple can be justified for growth companies like Nvidia, but not for Costco and definitely not for Walmart. x.com x.comÂ
