Costco Wholesale (NASDAQ: COST) has long been a favorite among long-term investors—and for good reason.
With its fortress-like balance sheet, loyal membership base, and consistent growth, Costco has proven to be a defensive powerhouse in both bull and bear markets.
But with the stock trading near all-time highs and its valuation stretched, investors are asking a crucial question in 2025: Is Costco still a buy today?
Let’s break down the fundamentals, growth outlook, valuation, and risks to help you decide.
Costco’s business model—built around low prices, bulk goods, and annual memberships—has continued to deliver in a changing retail environment.
Over the trailing twelve months, the company posted revenue exceeding $260 billion, reflecting around 8% year-over-year growth.
Net income topped $7.5 billion, with earnings per share (EPS) reaching $17.50. Recent earnings also beat Wall Street expectations, thanks to disciplined cost control and strong consumer demand.
Same-store sales remain a key strength, and the company’s international locations and e-commerce platform continue to gain traction. While digital makes up a relatively small portion of revenue, double-digit growth in this segment signals a long-term opportunity.
Costco’s not-so-secret advantage lies in its high-margin membership fees. The company brings in around $4.5 billion annually from memberships alone, with renewal rates hovering around 90% in the U.S. and 88% globally.
This recurring revenue stream gives Costco unparalleled stability, especially during uncertain macroeconomic periods.
In essence, even if retail sales fluctuate, those membership dollars keep flowing in—a massive advantage for long-term profitability and cash flow.
Costco operates with one of the strongest balance sheets in the retail sector. The company holds approximately $14 billion in cash, with a low debt-to-equity ratio of 0.30, and continues to generate substantial free cash flow.
With a return on equity around 28%, Costco is making efficient use of shareholder capital.
This strong financial position also allows the company to weather economic downturns, reinvest in its business, and deliver solid shareholder returns through dividends and special payouts.
Costco’s dividend yield sits at a modest ~0.60%, but that doesn’t tell the full story. The company has a history of special dividends, rewarding investors generously over time.
Unlike many of its peers, Costco is disciplined with share buybacks and instead focuses on operational reinvestment and shareholder payouts through its growing dividend.
If you’re a dividend growth investor who values consistency and capital preservation, Costco fits the mold perfectly.
Costco’s global expansion continues to be a major tailwind. Stores in China, Japan, and Europe are seeing high demand, and with over 875 warehouses globally, there’s still room to grow—especially in Asia.
On the digital front, Costco is gradually scaling its e-commerce capabilities, including same-day grocery delivery, digital coupons, and mobile-first membership features.
Though still in its early stages, Costco’s online strategy is complementing its physical footprint rather than trying to replace it.
Another major strength? Its Kirkland Signature private label, which generates over $60 billion annually. This brand loyalty enhances margins and keeps customers coming back.
Here’s where the story gets complicated. Costco is currently trading at a price-to-earnings (P/E) ratio of about 45, significantly above its historical average. Its forward P/E sits near 36, and the PEG ratio is around 2.5—implying that the stock may be overvalued relative to its growth rate.
| Metric | Costco (COST) | Walmart (WMT) | Target (TGT) |
|---|---|---|---|
| P/E (TTM) | ~45x | ~28x | ~20x |
| Net Margin | ~2.9% | ~2.5% | ~3.8% |
| Dividend Yield | ~0.60% | ~1.45% | ~2.6% |
Yes, you’re paying a premium for quality—but in a higher-interest-rate environment, that premium leaves little margin for error.
Despite Costco’s strength, there are a few watchouts:
Valuation Risk: The high multiple could compress if growth slows or if macro conditions worsen.
Consumer Spending: Inflation and recession fears could impact discretionary purchases.
Global Competition: Rivals like Amazon and Walmart are aggressively pursuing similar strategies, including bulk deals and faster delivery.
Supply Chain Pressures: While largely managed well, future disruptions could still affect inventory and pricing.
As of April 2025, most analysts rate Costco as a Buy or Hold, with price targets ranging from $650 to $750 (current share price is approximately $710). The consensus is clear: while Costco may not be a screaming value buy, it remains a dependable long-term investment.
So, is Costco a buy?
Yes—if you’re a long-term investor who prioritizes quality, consistency, and steady growth.
However, given its elevated valuation, a better entry point could present itself in a market pullback or broader correction. Dollar-cost averaging may be a smart move for those looking to build a position gradually.
Bottom Line: Costco may not be cheap, but it’s a rare combination of stability, brand loyalty, and growth potential. For patient investors with a long-term mindset, COST still belongs on the buy list—just don’t expect it to be a short-term rocket.
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