Costco Wholesale Corp (COST, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $729.7, Costco Wholesale Corp has witnessed a daily loss of 0.36%, marked against a three-month change of 7.24%. A thorough analysis, underlined by the GF Score, suggests that Costco Wholesale Corp is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 8/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 9/10
Costco Wholesale Corp's GF Score of 92 out of 100 signals the highest outperformance potential, with particularly high ranks in financial strength, profitability, and growth, while the GF Value rank is a bit lower.
Understanding Costco Wholesale Corp's Business
Costco Wholesale Corp operates a membership-based, no-frills retail model, predicated on offering a select product assortment in bulk quantities at bargain prices. The firm avoids maintaining costly product displays by keeping inventory on pallets and limits distribution expenses by storing its inventory at point of sale in the warehouse. Given Costco's frugal cost structure, the firm is able to price its merchandise below competing retailers, driving high sales volume per warehouse and allowing the retailer to generate strong profits on thin margins. Costco operates over 600 warehouses in the United States and boasts over 60% market share in the domestic warehouse club industry. Internationally, Costco operates another 270 warehouses, primarily in markets such as Canada, Mexico, Japan, and the UK.
With a market cap of $323.62 billion and sales of $248.83 billion, Costco Wholesale Corp's operating margin stands at 3.42%, reflecting its efficient cost management and profitability.
Financial Strength Breakdown
Costco Wholesale Corp's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Costco Wholesale Corp stands impressively at 49.74, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With an Altman Z-Score of 8.76, Costco Wholesale Corp exhibits a strong defense against financial distress, highlighting its robust financial stability. Additionally, a favorable Debt-to-Revenue ratio of 0.04 solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Costco Wholesale Corp's impressive standing among its peers in generating profit. Its Operating Margin has increased over the past five years, indicating a trend of growing profitability.
The Piotroski F-Score confirms Costco Wholesale Corp's solid financial situation, while its strong Predictability Rank of 4.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Costco Wholesale Corp demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 13.2%, which outperforms better than 76.53% of companies in the Retail - Defensive industry. Moreover, Costco Wholesale Corp has seen a robust increase in its EBITDA over the past few years, emphasizing its capability to drive growth.
Conclusion: Costco Wholesale Corp's Position for Outperformance
Considering Costco Wholesale Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. The company's strategic business model, combined with its strong financial indicators, positions it as a compelling choice for investors seeking stable growth and market leadership.
For investors looking to discover more companies with strong GF Scores, GuruFocus Premium members can use the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
