Costco, analysed ten ways (10 PILLARS ANALYSIS) One company, one day, ten methods — written the evening before its year-end report

1 Full stock analysis

What this method is for: to hold the whole company in view at once, so that no single strong number — a growth rate, a multiple, a chart — gets to decide the question by itself.

The business, and where the money comes from

Merchandise sales are the revenue; membership fees are the profit. Our data holds the first as one line — trailing twelve-month revenue of $293.59bn against $268.78bn in the prior twelve months, +9.23% — and does not separate the second, which is the first thing a reader should know about every margin figure on this page (see the box below). What the figures do show is the shape: gross margin 12.88%, operating margin 3.82%, net margin 3.01%. A supermarket with those margins would be ordinary. A company that chooses them, and grows net income 12.69% on them, is doing something else.

Competitive position, in one paragraph

The moat is cost, and the cost advantage is a decision rather than an accident: a short product list bought in volume, a capped markup, a warehouse instead of a shop, and a fee that pays for the building. Scored on tab 3. The membership is what turns a cost advantage into a habit — a household that has paid for the year shops there to justify the fee — and the renewal is what makes the earnings line steadier than the sales line. It is also the moat's limit: a member who does not renew is gone at once, which is why the renewal rate is the figure the market watches and the one our data does not hold.

Industry, at the level that matters here

Discount retail is a scale business in which the largest buyer gets the lowest price and passes some of it on, so the advantage compounds with size. The industry argument of the moment is whether online delivery breaks that — whether a household that can have anything brought to the door still drives to a warehouse for a pallet of paper towels. The figures on this page say it has not happened yet: the most recent quarter grew 11.58%, faster than the year. What they cannot say is whether the multiple already assumes it never will.

Financial health

Improving on every line we hold. Operating margin over the trailing twelve months is 3.82%, against 3.77% for financial 2025, 3.65% for 2024 and 3.35% for 2023. Gross margin has risen each year, from 12.26% to 12.88%. Net margin from 2.60% to 3.01%. Small numbers, moving the right way for three years — and in a business earning three cents on the dollar, four tenths of a point of net margin is a seventh of the profit. The numbers, year by year, are on tab 2.

The key risks, in one line each

• The multiple. 45.24 times earnings for a business with a 3.01% net margin, and it has already taken the share down 17.97% from May while earnings rose. Ranked and argued on tab 5.
• Growth slowing into single digits. Revenue at 9.23% is the number the multiple leans on; the two-year compound rate is 6.58%.
• Margin, in either direction. Thin by design; a one-point move is a quarter of the profit.
• The market itself. The share has lagged SPY by 20.6 points over a year with a beta of 0.86; it is not a market problem, it is a Costco one.

Valuation, against the only comparison we can make honestly

Our data carries a price-to-sales ratio of 1.36 and a P/E of 45.24. We do not hold a peer set, so this page does not print a "retail trades at 25×" it cannot source. What tab 4 does instead is turn the question around: given the price, what growth is already assumed? That arithmetic uses only figures we hold and every step of it is shown — and the answer, for once, is not a demanding one.

Three cases, with what would have to be true

Twelve to twenty-four months: what to watch, not what will happen

This page does not forecast a price. What it can say is which number will settle the argument, and it is revenue growth, reported quarterly — because tab 4 shows the margin half of the requirement is already being met and the growth half is the one that decides whether 45× is the floor or the ceiling. The next report is tomorrow, 24 September 2026, the sixteen-week fourth quarter: EPS estimate $6.54, revenue estimate $94.86bn, which would be 10.1% above the same quarter last year.

2 Financial breakdown

What this method is for: to see whether the company is getting stronger or weaker over years rather than quarters, by reading growth, margin and earnings as one sequence instead of three headlines.

The sequence

Revenue: steady, and quietly accelerating

From $242.29bn in FY2023 to $275.24bn in FY2025 is a compound annual rate of 6.58%. The trailing twelve months grew 9.23%, and the most recent quarter 11.58%. Each window is faster than the longer one before it, which is the opposite of the usual disease of a company this size. For a business adding roughly $25bn of sales a year, it is a genuinely strong sequence and the reason the multiple exists at all.

Earnings: growing faster than sales, every year

Net income was $6.29bn in FY2023, $7.37bn in FY2024, $8.10bn in FY2025 and $8.84bn over the trailing twelve months: a compound rate of 13.45% against revenue's 6.58%. EPS tells the same story: $14.16 to $19.88. When profit compounds at twice the rate of sales for three years in a business with a three-per-cent margin, the explanation is arithmetic rather than magic — a fee line that grows without a matching cost of goods lifts the whole margin stack a few tenths at a time, and a few tenths on $290bn is a billion dollars.

Margins: three years in one direction

Gross margin is up 0.62 points in three years and operating margin 0.47. On the scale this company works at, those are not rounding errors: the operating margin gain alone is worth about $1.4bn a year on today's revenue. The number to follow is the operating line, because gross margin here is partly policy — the company caps its markup — and operating margin is where the fee income and the cost discipline both show.

Why there is no rule of 40 here

The rule of 40 is a convention for subscription software, where growth and operating margin trade off against each other at high gross margins. A retailer with a 12.88% gross margin fails it by construction and learns nothing from failing. The equivalent test for this business is simpler: is net income growing faster than revenue? It is, by 12.69% to 9.23%.

Verdict of this method alone

Strong on every line we hold, and getting stronger. Revenue accelerating, margins rising, earnings compounding at twice the rate of sales. This method cannot tell you whether the price already knows all of that — that is tab 4's job — and it cannot tell you what the fee line is doing underneath, because we do not hold it.

3 Competitive advantage — the moat

What this method is for: to ask why the company's profits should still exist in ten years, since anything profitable and unprotected gets competed away.

The five sources, scored one at a time

Cost advantage — strong, and the whole moat

This is worth being precise about, because the number that proves it looks like a weakness. A gross margin of 12.88% is not what the company can earn; it is what it chooses to earn, by capping its markup and passing the rest of its buying power to the member. The advantage is that its buying power is larger than anyone else's who plays the same game: a short product list bought in enormous volume, sold in large sizes out of a warehouse that costs less to run than a shop. A competitor can copy the format; it cannot copy the volume, and the volume is what sets the price. That is the most durable cost advantage in retail and it has compounded for decades.

Brand — strong

Not a brand in the consumer-goods sense — it commands no premium; the point is the opposite. It is a brand in the trust sense: the member believes the price is fair without checking, which is what lets the product list stay short. The company's own private label is the evidence that the trust is real, because a private label only sells at scale when the shopper trusts the shop more than the manufacturer.

Switching costs — moderate

A paid annual fee is a switching cost of a modest, deliberate kind: a household that has paid it shops there to justify it, and renewing is easier than deciding. It is not the years-long re-implementation that protects enterprise software. A member can leave at the next renewal and lose nothing but the habit. That is why the renewal rate — which our data does not hold — is the figure this moat lives or dies on, and why every quarter's release states it.

Network effects — weak

One member's shopping does not make the warehouse more valuable to the next member directly. It does so indirectly, through volume and therefore price, but that is the cost advantage wearing a different name. Scoring it twice would be double counting.

Proprietary technology and patents — weak

There is none of consequence, and the company's advantage has never depended on any. The technology risk runs the other way: whether somebody else's — delivery at scale — erodes the reason to drive to a warehouse. Tab 5 ranks that.

Against the alternatives

The competition is three things. The other warehouse clubs, which play the same game with less volume and therefore a slightly worse price. The largest general retailers, which have the volume but not the format or the fee. And online delivery, which does not compete on price for a pallet of anything but competes on the trip. The first two are the pricing threat and the figures say they are not winning; the third is the format threat and the figures cannot see it yet.

The score, and what it is worth

Eight, and the reasoning is the argument rather than the number. A cost advantage that has compounded for decades and a membership that turns it into a renewal are together one of the more durable moats in any industry. What holds it below nine is that the switching cost is a habit rather than a lock, and a habit can be broken by a better habit — which is the one risk on tab 5 that the financial figures on tab 2 are structurally unable to warn about in advance.

4 Valuation

What this method is for: to separate the company from the price, because a good business bought at the wrong number is a bad investment and the two questions have different answers.

Where the multiple is

Forty-five times earnings is a growth multiple, on a company that grows revenue at high single digits and earnings at low double digits. A year ago it was 53.5 times: the share was $943.27 and EPS was $17.63. Since then EPS rose to $19.88 and the share fell to $899.41. That is a multiple compressing by about 15% in a year in which the business did nothing but improve, and it is the tension the rest of this panel measures.

The reverse question: what does the price already assume?

Rather than guess the future and discount it, hold the price still and solve for the growth that would justify it. The arithmetic: pick a multiple a mature version of this company might trade at in five years, divide today's price by it to get the EPS that would be needed, multiply by the 444.4m shares to get the net income needed, then divide by today's net margin of 3.01% to get the revenue needed. Compare that revenue with today's $293.59bn.

How to read that table. It does not say the share is expensive or cheap. It says: for the buyer at $899.41 to simply get their money back with the share trading at 30× in 2031, this company has to compound revenue at 8.6% a year for five years and hold today's net margin. It is currently growing at 9.23%, and the margin has risen every year in the table on tab 2 — so both halves of that requirement are being met today. The table only turns demanding at 20×, the multiple of an ordinary retailer, where the price would need 17.7% growth that nothing in the record supports. The whole valuation question is therefore one question: is this a 30× company or a 20× one?

The comparison this page will not print

The method asks for an industry-average multiple. Our data does not carry a peer set for this company, so any "discount retail trades at 25×" here would be a number I remembered rather than measured, and the whole value of the table above is that it contains none of those. A reader who wants the peer comparison can build it in the app: open the chart's Key stats tab for two or three comparable retailers and read the P/E line from the same source for each.

5 Risk

What this method is for: to work out what would have to go wrong and how much it would cost, because the size of a loss matters more than its likelihood when the position is large.

Ranked most dangerous first. "Dangerous" here means the product of how likely it is and how much of the share price it would take, not how frightening it sounds.

1. Multiple compression — the largest risk, and the only one currently firing At 45.24 times earnings the price is a claim about the multiple the market will pay in five years, not about next quarter. This risk is not hypothetical: the share is 17.97% below its May high and 4.65% below a year ago while EPS rose 12.76%. The business improved and the share fell. That is what this risk looks like when it happens, and the table on tab 4 says the distance from 30× to 20× is the distance from "the growth is enough" to "the growth is nowhere near enough".
2. Revenue growth returning to the two-year rate The multiple is leaning on 9.23%, and the most recent quarter's 11.58%. The two-year compound rate is 6.58%. If the acceleration of the last year reverses, the 30× row on tab 4 stops being met and the price has to find a lower row. This is the risk tomorrow's report speaks to most directly, and the revenue estimate of $94.86bn is a 10.1% bar.
3. Margin, which is thin by design Operating margin is 3.82%. A one-point move in either direction is roughly a quarter of the profit. The three-year record is of the margin rising, and the bull case rests on it continuing; the bear only needs it to stop. Ranked third rather than first because the record is long and consistent, not because the stake is small.
4. The format losing to the doorstep Whether delivery at scale erodes the reason to drive to a warehouse. Nothing in the figures shows it — the last quarter was the fastest — and that is exactly the problem with this risk: the financial statements will report it only after it has happened. It is ranked fourth for timing, not for size.
5. The consumer, and the market Beta of 0.86 says the share moves a little less than the market, which is the defensive quality institutions buy it for. The last year is a warning that the defensiveness cuts both ways: SPY rose 15.98% and this share fell, so a holder was protected from nothing and missed the rise.
6. Trade policy and imported goods A warehouse club imports a large share of what it sells, and tariffs raise the cost of goods in a business that caps its markup. Ranked last because the cost is passed to the member at the shelf and the figures show no margin damage so far; it would move up the list the quarter that changes.

6 Growth potential

What this method is for: to ask where the next hundred billion of revenue would have to come from, and whether there is a plausible place for it to come from.

What the growth has actually been

Accelerating, at nearly three hundred billion dollars of scale. The most recent quarter grew faster than the trailing year, which grew faster than the two-year compound rate. Deceleration is the usual disease of a company this size and there is no sign of it in these three numbers. The caveat is that the twelve-week third quarter is the smallest of the year and the sixteen-week fourth quarter reported tomorrow is the one that sets the annual rate.

Where more revenue would come from

• More warehouses. The historical engine and the simplest: a new building in a new region brings new members and their fees. It is capital-intensive and slow, and it has worked for forty years. Our data does not hold the warehouse count, so this page cannot say how many opened this year — the release will.
• The fee itself. Raised rarely and by a known amount; when it is, the increase flows almost entirely to profit because there is no cost of goods against it. The margin rise on tab 2 is consistent with a fee increase working its way through the membership base, though we cannot separate it from the rest.
• More spend per member. Online, delivery and categories a warehouse did not used to sell. This is where the format question on tab 5 either becomes a growth line or a defence line, and the figures cannot yet tell which.
• International. The same format in countries that do not yet have it. The largest addressable prize and the slowest, because each market needs its own buying volume before the price advantage exists.

The arithmetic of the next five years

Tab 4 computed what growth the price assumes; this is the same figure read as an operating question. To reach $442.7bn of revenue by 2031 — the 8.6% compound rate the 30× row needs — this company has to add $149bn of annual revenue in five years, having added $32.95bn in the two years to FY2025 and about $25bn in the last twelve months alone. That is a continuation of the current trajectory, not an acceleration. The growth case rests on the trajectory holding for longer than most retailers manage, which is a smaller claim than most growth cases make.

7 The institutional view

What this method is for: to look at the share the way the people who move it do, since a private investor is trading against institutions and it helps to know what they are solving for.

A fund manager is not answering "is this a good company". They are answering "does this position help the portfolio I have to report on", and those are different questions with different answers.

Why a large fund would own it

• It is investable at size. A $398.87bn market cap with daily volume averaging 1.96m shares over thirty days — about $1.8bn a day at today's price — means a large position can be built and, more importantly, sold.
• The earnings line behaves like a subscription's. Three years of net income compounding at 13.45% with no down year in the table is the forecastable line a valuation model needs, and a fee-based retailer is one of very few consumer businesses that produces it.
• It is a defensible holding. Uncomfortable but true: a manager who owns the best-known warehouse club and is wrong has an easier conversation than one who owns something unfamiliar and is wrong. Beta of 0.86 is the number that makes it a "defensive" line in a portfolio report.
• The multiple has already come in. From 53.5× to 45.24× in a year with earnings up 12.76% is the shape a quality-at-a-better-price mandate is built to look for.

Why a large fund would avoid it

• Forty-five times a three-per-cent margin. The position's outcome depends more on the multiple in five years than on anything the company does next quarter, and multiples are not forecastable.
• Relative performance. Down 4.65% in a year in which SPY rose 15.98%, a gap of 20.6 points — and behind on every window we measure, one month to one year. A manager measured against the index has been paying for this position for a year.
• The tape. Below the 20-day, 50-day and 200-day averages, RSI(14) at 38.5 from 57.6 twenty sessions ago, MACD below its signal. A quantitative sleeve reads that as a downtrend and does not care about tab 3.
• The last report. The first estimate miss in the series and a 3.91% fall on 3.58 times average volume. A risk committee remembers that number.

The catalysts a professional would have in the calendar

• 24 September 2026 — tomorrow — the sixteen-week fourth quarter and the full year. Estimates: EPS $6.54, revenue $94.86bn. The lines that matter are the revenue growth rate against 10.1% and the renewal rate, which our data does not hold and the release will.
• The $885.50 floor — the 20-day box's low edge, 1.55% below the close. A close under it puts the December low at $844.06 back in the conversation.
• The $960.19 line — the 200-day average, with the 20-day box top less than a per cent above it. The price has been under it since early September; a close back above it is what a trend-following buyer waits for.

The thesis, stated as an institution would state it

8 Bull versus bear

What this method is for: to force the strongest version of the argument you disagree with, because the case you cannot state is the one that costs you money.

Both analysts below are arguing from the same figures on this page. That is the exercise: identical data, opposite conclusions, and the reader watching where the disagreement actually is.

Where the disagreement actually is

They agree on every figure. They disagree about one question: is the multiple that of a subscription business or of a retailer? The bull says the earnings behave like the first and so should the price; the bear says the balance sheet of the business — three cents on the dollar — is the second, and the market has spent a year remembering it. Neither has proof, because the evidence is a series of quarterly growth rates that has not been reported yet. That is why tab 1 nominates revenue growth as the number to watch, and why an investor who cannot say which multiple they believe in is holding a position in the market's mood rather than in the company.

9 The last earnings report

What this method is for: to read a quarter as evidence rather than as news — what was expected, what arrived, and what the price did about the difference.

Q3 FY2026, twelve weeks to 10 May, reported 28 May 2026

A beat on revenue and a miss on earnings — the first EPS miss in the five reports our data covers, by seven cents. On the headline, a mixed quarter.

What was underneath the headline

Revenue up 11.58%; net income up 15.19%; operating margin of 3.99% against 3.77% for the whole of FY2025. Underneath the seven-cent miss was the best-growing quarter in the table, with the highest operating margin. A reader who stopped at "missed by seven cents" would have learned the opposite of what happened to the business — and the market, which read the seven cents, took the share down 3.91% the next session on 3.58 times average volume, the second largest move of the year. That is not a comment on the quarter. It is a comment on the multiple.

The market's answer, four reports running

The company reports after the close, so "close on the day" is the price before the report and "by the next close" is the market's actual answer, cumulative from the close before.

The size of the surprises is worth reading as a sequence on its own: +0.94%, +1.21%, +5.39%, +0.66%, −1.40%. A company that clears the bar by a cent or two for years is a company whose estimates have caught up with it, and the first miss in that pattern is what a market at a high multiple is waiting for.

Next — tomorrow

24 September 2026, after the close. The sixteen-week fourth quarter and the full year. Estimates: EPS $6.54 (11.4% above last year's $5.87), revenue $94.86bn (10.1% above last year's $86.16bn). Based on the table above, the estimate is the least interesting thing about it: the share has fallen after reports that beat by a per cent. What the market is deciding is whether 10% growth is the new rate or the peak of the acceleration.

10 The decision

What this method is for: to put the other nine together and reach a decision — which, on this site, means reaching your decision. This page does not issue a verdict, and the next paragraph explains why that is a position rather than a dodge.

What each method concluded, in one line

The short term, one year

Two numbers bound it, and both are on the chart. $885.50 is the floor of the 20-day box, 1.55% under the close, and the last line before the December low at $844.06. $960.19 is the 200-day average, with the box top less than a per cent above it — the level the price lost in early September and would have to regain for the chart to say anything other than "down". Between them, the argument continues. The single scheduled event that could resolve it is tomorrow, 24 September 2026, and the table on tab 9 says the first two sessions after it have not been kind.

The long term, five years and more

It reduces to one question, and tab 8 established that both sides already agree it is the question: does a retailer whose earnings compound like a subscription's keep a subscription's multiple? If it does, 30× in five years is a floor, the growth the price needs is the growth the company delivers, and the last year's fall was the buying opportunity the bull describes. If it does not, 20× is where retailers live, and 45× is a long way to fall from while the business does nothing wrong.

The catalysts, dated

• 24 September 2026, after the close — the year-end report. Watch the revenue growth rate against 10.1% first, the renewal rate second, the EPS headline last.
• Any quarter in which revenue growth falls back below 7% — the two-year rate — is the bear case's first real evidence.
• A close below $885.50 — the box floor fails and the December low is the next reference.
• A close above $960.19 — the 200-day average is regained and the four-month downtrend is at least questioned.

The questions to answer for yourself

These are the four the nine panels above cannot answer for you, because the answers are about you rather than about the company:

1. Which multiple do you actually believe in, and what would change your mind? If your answer is a number you cannot defend against the 20× row, you have a preference rather than a view.
2. Can you hold something that falls another 18% while earnings keep rising? It did exactly that between May and today. The question is not whether it can happen.
3. Is your horizon longer than the argument? The multiple question is settled by a series of quarterly growth rates, not by tomorrow's. A position with a shorter horizon than its own thesis is a bet on the report, not on the company.
4. Are you buying the company or the defensiveness? Beta of 0.86 protected nobody from a 20.6-point lag against the index this year. If the reason is "it is safe", the last twelve months are the counter-example.