Given the current market and economic patterns, one might assume that the path to significant gains lies in investing in the technology sector due to its housing of many powerful companies. However, it’s important to remember that other industries can also yield profitable returns.
From mid-July 1995 onwards, one leading retail stock has delivered an astonishing total return of more than 16,000%, which equates to approximately 18.5% per year. If you had invested $1,000 in this company back then, it would be worth around $163,000 today. This impressive performance is a result of the company’s consistent success, coupled with patience and the magic of compound interest, leading to a remarkable return for shareholders.
Here’s more about this business and whether it deserves a spot in your portfolio.
Costco is a dominant force in retail
Costco, or COST as it’s sometimes referred to, is recognized for offering top-notch products at remarkably discounted rates within its spacious warehouse outlets. A unique aspect about this retailer is that access is granted only after an annual membership fee has been paid.
Fundamentally, our business strategy has remained consistent from the startup phase. Yet, throughout the years, we’ve made tactical adjustments to keep us relevant and ahead of the competition – a necessity especially in the retail industry.
Originally, Costco catered exclusively to small businesses. However, now they welcome any individual as a member, thereby significantly expanding the possible income sources by making the warehouse accessible to a broader demographic.
The company has achieved significant success with its Kirkland private label, initially launched in 1995. Approximately a quarter of Costco’s total sales, not including gasoline sales, stem from this brand. If considered independently, Kirkland would rank among the largest consumer goods companies globally.
Costco is progressively broadening its horizons by venturing into more international territories. Currently, about 81% of its warehouses, which number 905, are situated in the U.S. and Canada. However, the company aims to transform itself into a truly global entity, with an ambition to open half of its annual new warehouses in foreign countries.
Lately, with technological progress shaping consumer preferences, Costco hasn’t been complacent. In fact, its digital income is expanding quicker than its entire operation, as evidenced by a 11.5% increase in e-commerce same-store sales in June.
Is Costco stock a buy now?
Over a span of more than three decades, a company must be established and thriving for its stocks to perform so exceptionally well. It’s reasonable to assume that such a company is a dominant force in its industry today. This can certainly be said about Costco, whose staggering $62 billion in net sales during the third quarter of fiscal 2025 (ending May 11) places it as the third-largest retailer globally.
The significant size of Costco allows it to make massive sales, which in turn necessitates purchasing large quantities of merchandise from its suppliers. However, with only 4,000 stock-keeping units, far fewer than the tens of thousands found at common supermarkets, Costco holds a considerable bargaining chip, enabling it to secure favorable pricing that ultimately benefits shoppers. This advantage is here to stay.
In spite of its current large size, Costco is still growing at an impressive pace. Analysts on Wall Street anticipate that the company’s revenue and earnings per share will increase by 7.7% and 11.2%, respectively, each year, from fiscal 2024 through 2027. This growth represents a continued period of financial success for Costco, demonstrating its consistent performance as a thriving business.
Costco, known for its superior quality, has previously been a successful investment choice. Yet, I am hesitant about its potential in the future for investors. The core business is stable, but what gives me pause is the current valuation.
By July 16th, this stock has reached extremely high prices, with a price-to-earnings ratio of 54.2. If you’re considering purchasing shares, you should be prepared to pay a premium. Historically, there have been only a handful of instances where the valuation was higher than it is now. Consequently, potential investors might want to hold off and look for a more favorable buying opportunity instead.
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2025-07-21 15:55