Costco has been treading water for the past six months, recording a small loss of 2.7% while holding steady at $958.95. The stock also fell short of the S&P 500’s 11.3% gain during that period.

Is now the time to buy COST? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.

Why Does COST Stock Spark Debate?

Designed to be a one-stop shop for the suburban consumer, Costco (NASDAQ: COST) is a membership-only retail chain that sells groceries, apparel, toys, and household items, often in bulk quantities.

Two Positive Attributes:

1. Surging Same-Store Sales Show Increasing Demand

Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Costco has been one of the most successful retailers over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 6.6%.

2. Economies of Scale Give It Negotiating Leverage with Suppliers

With $293.6 billion in revenue over the past 12 months, Costco is a behemoth in the consumer retail sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because there are only a finite number of places to build new stores, making it harder to find incremental growth. For Costco to boost its sales, it likely needs to adjust its prices or lean into foreign markets.

One Reason to Be Careful:

Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Costco grew its sales at a mediocre 7.6% compounded annual growth rate. This wasn’t a great result compared to the rest of the consumer retail sector, but there are still things to like about Costco.

Final Judgment

Costco’s merits more than compensate for its flaws. With its shares lagging the market recently, the stock trades at 43.9× forward P/E (or $958.95 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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