During the past several years, Costco has achieved astounding success. Following the Coronavirus pandemic, consumers flocked to warehouses to fulfill their essential shopping needs.
With the U.S. experiencing rising inflation over the past few months, Costco’s low prices are a massive relief to budget-strapped households.
Costco is attractive from an investing perspective because its business model does not invite much disruption, especially in light of the growing popularity of growth tech stocks. There is little doubt that Costco will continue to offer high-quality merchandise at low prices for years since it has been doing the same for decades. Investing in it is an excellent choice due to its durability and sustainability.
Reason to avoid
However, suppose you’re more concerned with the price you’re willing to pay, such as in today’s economic environment of rising rates and uncertainty. In that case, you might consider watching Costco for now and waiting for a pullback.
There was a 32% drop in stock price between early April and late May, so a price dip is not impossible. The problem is that investors would have difficulty finding a business or stock that would earn far greater returns than Costco for a long time.
See here the live prices of Costco Stock.
Technical analysis
Costco’s longstanding success has not gone unnoticed by investors; they know the company’s quality. A price-to-earnings (P/E) ratio of 43 remains high even after the stock fell just under 4% in 2022, far higher than the trailing 5-year average of 35.
Furthermore, Costco’s valuation is higher than that of its rivals, Walmart and B.J.’s Wholesale Club. Currently, Costco Wholesale is rated Buy by the majority of analysts. Twenty-one buys, four hold, and no sell ratings give the company an average score of 2.84.
During Q3, Costco’s sales increased by 5.6% in shopping frequency and 7.6% in the average transaction total. Furthermore, Costco’s household membership increased by 6% compared to FYQ3 last year, reaching 64.4 million.
