The timing appears opportune to go long in shares of Costco Wholesale Corporation as we anticipate another pick-up in the underlying trend.
Summary
● The company has strong fundamentals. More than 70% of companies have a lower mix of growth, profitability, debt and visibility.
● The company presents an interesting fundamental situation from a short-term investment perspective.
● The company has a good ESG score relative to its sector, according to MSCI.
Strengths
● The average price target of analysts who are interested in the stock has been strongly revised upwards over the last four months.
● Considering the small differences between the analysts' various estimates, the group's business visibility is good.
Weaknesses
● As a percentage of sales and without taking into account depreciation and amortization, the company has relatively low margins.
● The company does not generate enough profits, which is an alarming weak point.
● The company's valuation in terms of earnings multiples is rather high. Indeed, the firm is getting paid 51.56 times its estimated earnings per share for the ongoing year.
● The company appears highly valued given the size of its balance sheet.
● The company is highly valued given the cash flows generated by its activity.
● The firm pays small or no dividend to shareholders. For that reason, it is not a yield company.
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Costco Wholesale Corporation specializes in the distribution of products and services at discount prices (food, sports equipment, household appliances, books, toys, jewelry, TVs, cameras, photo developing and printing services, etc.). The group develops its activity through a network of warehouse stores opened to individuals or companies who have paid a subscription fee. Net sales break down by revenue source as follows:
- sales of products (98.1%);
- sales of subscriptions (1.9%).
As of 01/09/2024, Costco Wholesale Corporation had a network of 890 warehouse stores located in the United States and Puerto Rico (614), Canada (108), Mexico (40), Japan (35), the United Kingdom (29), Korea (19), Australia (15), Taiwan (14), China (7), Spain (4), France (2), Sweden, New Zealand and Iceland.
Net sales are distributed geographically as follows: the United States (72.4%), Canada (13.7%) and other (13.9%).
