Costco Wholesale Corporation (COST) receives a weak valuation ranking of 22 from InvestorsObserver’s data analysis. The proprietary ranking system focuses on the underlying health of a company through analysis of its stock price, earnings, and growth rate. COST has a better value than 22% of stocks based on these valuation analytics. Investors primarily focused on buy-and-hold strategies will find the valuation ranking relevant to their goals when making investment decisions.
COST has a trailing twelve month price to Earnings (PE) ratio of 34.1. The historical average of roughly 15 shows a poor value for COST stock as investors are paying higher share prices relative to the company’s earnings. COST‘s high trailing PE ratio shows that the firm has been trading above its fair market value recently. Its trailing 12-month earnings per share (EPS) of 9.74 does not justify the stock’s current price. However, trailing PE ratios do not factor in the company’s projected growth rate, resulting in many newer firms having high PE ratios due to high growth potential enticing investors despite inadequate earnings.
COST currently has a 12-month-forward-PE-to-Growth (PEG) ratio of 3.77. The market is currently overvaluing COST in relation to its projected growth due to the PEG ratio being above the fair market value of 1. COST‘s PEG comes from its forward price to earnings ratio being divided by its growth rate. Because PEG ratios include more fundamentals of a company’s overall health with additional focus on the future, they are one of the most used valuation metrics by analysts.
COST‘s valuation metrics are weak at its current price due to a overvalued PEG ratio due to strong growth. COST‘s PE and PEG are worse than the market average resulting in a below average valuation score.