Now, Costco Wholesale (COST 0.72%) isn’t exactly tinkering with the latest in rocket science, what with its focus on bulk mayonnaise and reasonably priced tires. But dash it all, the chaps have been rather good to their investors, haven’t they? A positively ripping 170% increase in the share price over the last five years (as of January 26th) is nothing to sneeze at. This has, naturally, propelled the company to a market capitalization of a stout $434 billion. A most respectable sum, wouldn’t you agree?
The bullish amongst us are eyeing a larger prize, naturally. The question is, can this unstoppable force join the $1 trillion club within the next five years? It’s a bit of a lark, really, but a rather intriguing one at that.
The Fundamentals, As It Were
Five years hence, one can be fairly certain Costco will be a considerably larger beast. Management, with commendable regularity, opens between 25 and 30 warehouses annually. This, as any schoolboy knows, translates into more revenue. It’s frightfully simple, really. And they consistently post same-store sales growth, regardless of whether the economic wind is blowing a gale or a gentle breeze. A most impressive feat when one considers the general gloominess of consumer confidence. In the fiscal 2026 first quarter (ended November 23rd), SSS increased by a jolly 6.4%, and then another 7% in December. A bit of a spree, wouldn’t you say?
Net income climbed a staggering 102% between fiscal 2020 and 2025. One anticipates similar gains over the next five years. And it isn’t merely a loyal customer base; they keep adding new members each quarter, which, as you might imagine, encourages further spending. It’s a positively virtuous circle!
Running the Numbers – A Bit of Summing, If You Please
Currently, only eleven companies boast a trillion-dollar valuation. With the exception of a couple, they’re all rather heavily invested in the technology sector. Costco’s entry would add a touch of diversity to the mix, which, frankly, is a jolly good thing. However, one suspects that Walmart, currently sporting a market cap of $938 billion, will be joining the thirteen-figure family before Costco. A bit of a race, wouldn’t you say?
For Costco’s market cap to reach the trillion-dollar mark, it would need to increase by 129% between now and late January 2031. Over the past five years, it expanded by 172%. Based on this historical performance, it seems a perfectly reasonable outcome. Though, one must always be cautious about relying on the past to predict the future. It’s a bit like expecting a dachshund to win the Grand National, you see.
However, there’s a slight snag. Costco’s valuation is currently rather on the toppy side, with shares trading at a price-to-earnings ratio of 52.7. That’s about double the S&P 500’s multiple. One rather fears that this valuation ratio may come down over the next five years, which would somewhat dampen the effect of ongoing earnings growth. A bit of a bother, really.
A more probable scenario, therefore, is that Costco will join the $1 trillion club in ten years. A slightly longer wait, perhaps, but a perfectly acceptable one. It’s a bit like waiting for a particularly good vintage port to mature. Patience, my dear fellow, patience!
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2026-01-28 13:42