Is Costco Stock Still Worth the Price After Strong Membership Renewals in 2025?

Thinking About Costco Wholesale Stock? Here's What You Need to Know

Trying to decide whether to buy, sell, or simply hold onto Costco Wholesale stock? You are not alone. Even seasoned investors are giving this retail giant a fresh look, given how the stock has navigated both recent choppiness and impressive long-term gains. After all, this is a company whose loyal member base and strong business model have delivered some eye-catching returns, including nearly 9% in the past year and close to tripling in value over the last five years.

But what’s been happening recently? The stock dipped about 1% over the last week, reflecting some of the broader market’s concerns around consumer spending and inflation. Still, over the past month, Costco shares rose more than 2%, and for 2024 so far, they are up over 5%, outperforming many retail peers. Recent news about strong membership renewals and steady revenue growth continues to highlight what investors appreciate about Costco, while occasional dips seem to reflect short-term market jitters rather than fundamental weaknesses. With its most recent close at $958.54, and analysts still seeing a price target well above current levels, optimism remains.

So how does the current price compare to what Costco is really worth? Running it through some popular valuation metrics, the company actually earns a value score of 0 out of 6, which suggests it does not appear undervalued by these conventional checks. Don’t stop reading just yet though. Next, we’ll dig into the different methods analysts use to value Costco and why the best approach might not be what you expect.

Costco Wholesale delivered 9.6% returns over the last year. See how this stacks up to the rest of the Consumer Retailing industry.

Approach 1: Costco Wholesale Cash Flows

The Discounted Cash Flow (DCF) model is a common valuation tool that estimates the worth of a business by taking its expected future cash flows and discounting them back to today’s dollars. For Costco Wholesale, analysts use a “2 Stage Free Cash Flow to Equity” method to forecast how the company might perform over the next decade.

Right now, Costco’s latest twelve months of Free Cash Flow (FCF) came in at $7.5 billion. Looking ahead, projections see this number steadily climbing. By 2029, FCF is expected to reach about $11.3 billion, with continued growth through 2035. This steady rise is supported by consistent revenue streams and operational discipline.

When these future cash flows are all added up and discounted to present value, the estimated intrinsic value of Costco’s stock comes to $676.35 per share. When compared with the current share price of $958.54, this calculation suggests that Costco is trading at a premium. The DCF model implies the stock is 41.7% overvalued at current levels.

Result: OVERVALUED

Our DCF analysis suggests Costco Wholesale may be overvalued by 41.7%. Find undervalued stocks based on DCF analysis or create your own screener to find better value opportunities.

Approach 2: Costco Wholesale Price vs Earnings

The price-to-earnings (PE) ratio is often the go-to metric for valuing profitable companies because it tells you how much investors are willing to pay today for each dollar of earnings. It is especially useful when a company has a strong track record of profitability, like Costco, and can signal how the market views the stock’s future potential relative to its peers.

What is considered a fair PE ratio, however, depends on a few important factors. Companies expected to grow faster, or those seen as less risky, tend to trade at higher PE ratios. By contrast, more mature companies with slower growth might warrant lower values. Context is important when interpreting this number.

Costco’s current PE ratio is 54.2x, significantly higher than the Consumer Retailing industry average of just 21.6x and the peer average of 22.7x. Based on Simply Wall St’s proprietary Fair Ratio, which factors in growth, stability, profits, and other risk measures, Costco scores a fair PE ratio of 39.2x. While this indicates the company deserves a premium, the current multiple is still well above what would be considered fair given its fundamentals.

Comparing the actual PE ratio with the Fair Ratio suggests Costco shares are overvalued using this approach.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Costco Wholesale Narrative

Narratives offer a smarter, more personalized way to make investment decisions by connecting the story you believe about a company, such as expected growth, margins, and risks, with real, forward-looking financial forecasts to arrive at a fair value. Instead of relying just on standard ratios, Narratives let you set your assumptions and illustrate how those beliefs translate into a stock’s worth, making your reasoning clear both to yourself and other investors. On the Simply Wall St platform, millions use Narratives to quickly test their perspective, update their outlook as new news or earnings come in, and see in real time how their fair value compares to the current share price for timely investment decisions.

For example, some investors, using optimistic growth and margin assumptions, estimate Costco’s fair value at $1,225 per share, while others, more cautious about future prospects, arrive at a much lower fair value of just $489. By choosing or building a Narrative that best fits your own outlook, you can invest according to what you know and believe, while keeping your analysis up to date and aligned with fresh information as the market evolves.

For Costco Wholesale, we'll make it really easy for you with previews of two leading Costco Wholesale Narratives: 🐂 Costco Wholesale Bull Case

• Fair value: $1,072.67
• Currently trading 10.6% below this narrative fair value
• Forecast revenue growth: 7.1%

• Highlights warehouse expansion, longer gas station hours, and ongoing international growth as key drivers for revenue and membership increases.
• States that investment in e-commerce and higher employee wages is expected to support higher margins and strengthen long-term earnings.
• Notes that analyst consensus price targets indicate Costco is fairly priced; anticipated future growth could justify current levels.

🐻 Costco Wholesale Bear Case

• Fair value: $489.26
• Currently trading 96% above this narrative fair value
• Forecast revenue growth: 4.2%

• Cautions that current valuation is high unless Costco accelerates e-commerce, expands in emerging markets, and raises membership fees.
• Views the in-house Kirkland brand and special dividends as supporting profitability, but raises questions about the ongoing returns from new warehouse openings.
• Suggests the price-to-earnings multiple could decrease if the market adjusts to slower growth, which may make the stock appear overvalued relative to fundamentals.

Do you think there's more to the story for Costco Wholesale? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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