COST
COSTCO WHOLESALE CORP /NEWNasdaqValuation snapshot
Above bull casePrice is above even the bull case.
Price as of Sep 4, 2026 · Valuation Sep 5, 2026
What drives COST's base case?
base-case thesisCostco has been compounding revenue at a high-single-digit rate, with comparable sales excluding gas and currency swings running around 6.6% last quarter, membership fee income growing double digits, and operating margin climbing from roughly 3.4% in fiscal 2023 to about 3.85% in fiscal 2025. The base case assumes this durable, if slightly decelerating, growth continues as Costco keeps adding roughly 25-30 warehouses a year and digital sales keep growing faster than the store base. Margins keep inching up modestly since membership fees are almost pure profit, but Costco's low-markup philosophy limits how far margins can expand. The company keeps reinvesting a healthy share of profit into new clubs and digital infrastructure to fund this growth.
What shapes the assumptions
Membership fee growth outpacing merchandise sales
Membership fee income growth (10.7%-14% YoY over the last three quarters)
Raises revenue growth
Steady new warehouse pipeline
~28 net new warehouses guided for FY2026; footprint grew from 914 to 931 clubs
Raises revenue growth
Multi-year operating margin uptrend
Operating margin rose from ~3.4% (FY2023) to ~3.85% (FY2025)
Raises operating margin
Continued capex to fund expansion
~$6.5B FY2026 capex guidance (~2.3% of trailing revenue) for new clubs, depots, digital
Raises reinvestment
Effective tax rate holding near recent level
Effective tax rate of 25.1% in FY2025
Informs tax rate
Each driver links a business metric to the forecast assumption it shapes — the basis for this case, not investment advice.
Why the gap?
The market is pricing this as if revenue grows 39.3% a year. Over the last 8 years it grew 9.2% a year — so the price assumes far more than it has delivered.
What else could explain it?›
- Or, holding growth steady
- the price is also consistent with a 13.7% operating margin, against the 3.9% assumed here.
- How confident is this estimate?
- Robustness 72.0/10 (Strong) — some of any gap is our own uncertainty rather than disagreement.
- What would change the answer?
- Which assumption this valuation swings on, and by how much.
Many combinations of assumptions reproduce the same price. These are ways to read what the market might be expecting, not the market's actual view. How this is worked out
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
View details
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
Three independently researched cases generated automatically from published financials. Every assumption is justified and cited; the discount rate is computed from researched market inputs.
Company value drivers
Ranked operating metrics and the valuation assumptions they influence.
1. Comparable sales growth, reported (quarterly)
Same-store sales growth measures underlying demand at existing warehouses, the core engine of Costco's revenue growth apart from new unit openings.
9.8%
reported2. Operating margin, full fiscal year
Operating income as a share of total revenue shows how efficiently Costco converts its high sales volume into profit, the key margin lever in the model.
3.9%
derived3. Membership fee income growth, YoY (quarterly)
Membership fees are nearly pure profit and fund a large share of operating income, so their growth rate signals both member loyalty and future margin support.
10.7%
reported4. Total operating warehouses, period end
The total count of warehouse clubs open worldwide is the physical footprint that drives new-unit revenue growth and the pace of capital reinvestment.
931
reported5. Capital expenditures as % of trailing revenue (annual guidance)
Capex intensity indicates how much of Costco's profit must be plowed back into new clubs, depots, and digital infrastructure to sustain growth, directly shaping the reinvestment assumption.
2.3%
derivedBase inputs from financials
source period →Base revenue (TTM)
$286.8B
Diluted shares
444,420,000
Net cash
$11.6B
Bear
low confidence$241.88
IV / share
-73.9% vs $925.41
- Explicit cash flows
- $49.55
- Terminal value
- $166.17
- Net cash
- $26.15
- Intrinsic value / share
- $241.88
68.7% of the value rests on the terminal value — elevated dependency.
Revenue growth5.5% → 5.0% → 4.5% → 4.2% → 4.0%medium
How derived: Q3 FY2026 comps were +9.8% but only +6.6% once gas-price inflation and FX are stripped out, and FY2025's 8% growth followed a near-flat 0.96% YoY quarter as recently as Q4 FY2024; the bear case assumes tariff cost pass-through and a softening consumer erode underlying volume growth from ~6% toward the ~4% area Costco has posted in its weaker quarters, decelerating further as the base matures.
Why this confidence: Recent quarters show accelerating, not decelerating, comparable sales, cutting against the bear thesis ↓, Tariffs are an explicitly disclosed, primary-source company risk factor ↑, Five-year forecast horizon amplifies macro uncertainty ↓
Measured by
- Comparable sales growth, reported (quarterly)9.8%reported
- Membership fee income growth, YoY (quarterly)10.7%reported
- Total operating warehouses, period end931reported
Evidence for
- Costco's FY2025 Form 10-K lists tariffs as a risk factor that could adversely affect operating results despite mitigation efforts.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
- An investor analysis warns that new 15% worldwide tariffs and macro normalization could pressure Costco's supply chain and cause margin/growth deterioration around FQ3 FY2026.[Costco: Macro/Tariff Risks Persist (Seeking Alpha)]· secondary
Evidence against
- Costco's Q3 FY2026 comparable sales accelerated to +9.8% (+6.6% ex gas/FX), the strongest quarterly print in over a year, arguing against a sharp slowdown.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Operating margin3.5%medium
How derived: Full-year operating margin rose from about 3.41% in FY2023 to about 3.85% in FY2025; the bear case assumes tariff-driven cost increases and a faster-growing, lower-margin e-commerce mix (about 7% of FY2025 net sales) erase most of the last two years' gains, pulling margin back toward the FY2023 level.
Why this confidence: Three straight years of reported margin expansion contradicts the compression thesis ↓, Costco's low-markup pricing philosophy genuinely limits its ability to pass through cost inflation ↑, Margin is driven by many moving parts (mix, fees, supply chain) not fully observable quarter to quarter ↓
Measured by
- Operating margin, full fiscal year3.9%derived
- Membership fee income growth, YoY (quarterly)10.7%reported
Evidence for
- Costco's e-commerce business generally carries a lower gross margin than warehouse operations, per the FY2025 10-K.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
- Higher tariffs can adversely impact Costco's results even after mitigation efforts, per the FY2025 10-K risk factors.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Evidence against
- Operating margin has expanded in every recent fiscal year (about 3.41%→3.58%→3.85%, FY2023-FY2025), showing sustained improvement rather than deterioration.[Costco Operating Margin 2010-2025 (Macrotrends)]· secondary
Tax rate27.0%medium
How derived: FY2025's effective tax rate was 25.1%, up from 24.4% in FY2024 per the 10-K; the bear case extrapolates this upward drift, driven by a higher-tax domestic income mix and fading discrete stock-compensation benefits, to roughly 27% over the forecast.
Why this confidence: Directly observed two-year upward trend in the reported effective tax rate ↑, Discrete/one-off tax items make year-to-year comparisons noisy ↓
No tracked driver measures this assumption yet.
Evidence for
- Costco's effective tax rate rose from 24.4% in FY2024 to 25.1% in FY2025.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Evidence against
- FY2025's rate was still favorably impacted by discrete tax benefits related to stock compensation, a benefit that could persist rather than fade.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Reinvestment rate35.0%low
How derived: Management guides to about $6.5B of FY2026 capex (roughly 2.3% of trailing revenue) to fund ~28 net new warehouses; the bear case assumes weaker growth reduces the near-term need for new capacity, so the company reinvests a smaller share (~35%) of NOPAT than the base case.
Why this confidence: Actual warehouse additions this year are tracking guidance, not below it, undercutting an assumed capex pullback ↓, Capex guidance is explicit, forward-looking management disclosure ↑
Measured by
Evidence for
- Slower comparable sales growth would reduce the near-term need for the ~28 net new warehouses currently guided for FY2026.[Costco Q3 FY2026 Form 10-Q (SEC EDGAR)]· primary
Evidence against
- Costco added 17 net new warehouses (914→931) in under nine months of FY2026, tracking toward the high end of guidance rather than a pullback.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Terminal growth2.0%low
How derived: Long-run US nominal GDP growth (~2% real plus inflation) is the usual ceiling for a mature retailer's perpetuity growth; the bear case assumes Costco's US warehouse count approaches saturation and international expansion slows, so terminal growth settles at the low end near 2%.
Why this confidence: Terminal value depends on assumptions decades out that cannot be directly observed today ↓, US warehouse count concentration is a directly reported, verifiable fact ↑
No tracked driver measures this assumption yet.
Evidence for
- Costco's US and Puerto Rico warehouses (639 of 931 total as of Q3 FY2026) represent the large majority of its footprint, leaving less runway for US unit growth than in prior decades.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Evidence against
- Costco still added clubs across Mexico, Japan, UK, Korea, Australia, Taiwan, China, Spain, France and Sweden in its latest quarter, showing continued expansion runway outside the US.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Base
medium confidence$281.60
IV / share
-69.6% vs $925.41
- Explicit cash flows
- $50.22
- Terminal value
- $205.23
- Net cash
- $26.15
- Intrinsic value / share
- $281.60
72.9% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth7.5% → 7.0% → 6.5% → 6.2% → 6.0%high
How derived: FY2025 total revenue grew 8% and Q3 FY2026 comps ex-gas/FX ran 6.6%; the base case starts near the current underlying run-rate (~7.5%) and lets it decelerate gradually toward ~6% as the law of large numbers takes hold on a $286.8B TTM revenue base.
Why this confidence: Three consecutive quarters of company-reported, accelerating comparable sales ↑, Extrapolating a short recent acceleration five years forward risks overfitting to a temporary trend ↓
Measured by
- Comparable sales growth, reported (quarterly)9.8%reported
- Membership fee income growth, YoY (quarterly)10.7%reported
- Total operating warehouses, period end931reported
Price implies: 39.3% vs our 6.6% — one of several sets that fit this price
Evidence for
- Comparable sales growth accelerated over the last three reported quarters: 6.4% (Q1 FY26), 7.4% (Q2 FY26), 9.8% (Q3 FY26).[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Evidence against
- The FY2025 10-K notes tariffs and a lower-margin, faster-growing e-commerce mix as ongoing headwinds that could weigh on growth quality.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Operating margin3.9%high
How derived: Operating margin expanded from about 3.41% (FY2023) to about 3.85% (FY2025); the base case extends this trend at a decelerating pace to about 3.9%, reflecting continued membership-fee mix benefit and scale, tempered by Costco's commitment to capping markups.
Why this confidence: Three consecutive fiscal years of reported margin expansion ↑, Membership fee growth is decelerating quarter to quarter (14%→13.6%→10.7%), a headwind to further margin gains ↓
Measured by
- Operating margin, full fiscal year3.9%derived
- Membership fee income growth, YoY (quarterly)10.7%reported
Price implies: 13.7% vs our 3.9% — one of several sets that fit this price
Evidence for
- Membership fee income, which is high-margin, grew faster than merchandise sales in each of the last three quarters (10.7%-14% YoY).[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Evidence against
- Costco's e-commerce business carries structurally lower gross margin than warehouse sales, a mix headwind as digitally-enabled comps grew 21.5% in Q3 FY2026.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Tax rate25.8%high
How derived: FY2025's reported effective tax rate was 25.1%; the base case holds roughly at this level, assuming the recent modest upward drift from FY2024's 24.4% stabilizes rather than continuing to climb.
Why this confidence: Directly reported, most recent fiscal year figure ↑, Only two years of trend data available to judge stability ↓
No tracked driver measures this assumption yet.
Evidence for
- FY2025 effective tax rate was 25.1%, per the 10-K.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Evidence against
- The rate rose year over year (24.4%→25.1%), so holding it flat could understate continued upward drift.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Reinvestment rate45.0%medium
How derived: Management guides to ~$6.5B of FY2026 capex (~2.3% of TTM revenue) against an estimated ~$8B of NOPAT (TTM revenue x ~3.7% margin x ~75% tax retention); netting this capex against depreciation and Costco's negative working-capital float implies roughly 45% of NOPAT is reinvested to fund the ~28-warehouse annual opening pace.
Why this confidence: Explicit, quantified management capex guidance for the current fiscal year ↑, NOPAT and net-of-depreciation reinvestment figures are estimated, not directly disclosed by the company ↓
Measured by
Evidence for
- Costco guided to ~$6.5B of FY2026 capex for new warehouses, depot capacity, remodels, and digital investment.[Costco Targets $6.5B Capex, ~28 Net New Warehouses FY2026 (Yahoo Finance)]· secondary
Evidence against
- Costco funds capex from operating cash flow and cash on hand without added debt, per its 10-K, suggesting the reinvestment need is manageable rather than straining the balance sheet.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Terminal growth2.8%medium
How derived: Set near long-run US nominal GDP growth (about 2% real growth plus ~2% inflation, consistent with the current Treasury/inflation backdrop), reflecting a mature retailer that still adds international units but cannot outgrow the broader economy forever.
Why this confidence: Terminal growth is a long-run judgment call not directly observable in any single data point ↓, Anchored to an objective, published macro benchmark rather than company-specific extrapolation ↑
No tracked driver measures this assumption yet.
Evidence for
- Costco continues to add net new warehouses across international markets (Japan, Korea, Australia, China, Europe) each year, supporting above-domestic-GDP unit growth for years to come.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Evidence against
- US and Puerto Rico still account for 639 of Costco's 931 warehouses (about 69%), so most of the store base is in an already-mature, slow-unit-growth market.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Bull
low confidence$292.93
IV / share
-68.3% vs $925.41
- Explicit cash flows
- $47.51
- Terminal value
- $219.26
- Net cash
- $26.15
- Intrinsic value / share
- $292.93
74.9% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth9.5% → 9.0% → 8.5% → 8.0% → 7.5%medium
How derived: Q3 FY2026 net sales grew 11.6% and 36-week YTD sales grew 9.6%, with digitally-enabled comps up 21.5%; the bull case assumes this currently elevated, accelerating momentum persists with only mild deceleration over five years as new clubs, international expansion, and digital penetration keep compounding.
Why this confidence: Most recent quarter is the strongest in the dataset, supporting near-term momentum ↑, A large part of the headline acceleration is currency/gas-price driven, not all underlying volume ↓
Measured by
- Comparable sales growth, reported (quarterly)9.8%reported
- Membership fee income growth, YoY (quarterly)10.7%reported
- Total operating warehouses, period end931reported
Evidence for
- Costco's Q3 FY2026 net sales grew 11.6% YoY and digitally-enabled comparable sales grew 21.5%, both accelerating from prior quarters.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Evidence against
- Ex-gas/FX comparable sales were a more modest 6.6% in the same quarter, meaning some of the headline acceleration reflects gas prices and currency rather than pure volume.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Operating margin4.2%medium
How derived: Operating margin has expanded for three straight fiscal years (3.41%→3.58%→3.85%, FY2023-FY2025); the bull case extends this trajectory further given rising executive-membership mix (73.6% of FY2025 sales) and scale leverage, pushing margin to about 4.2%.
Why this confidence: Three-year uninterrupted margin uptrend supports continued expansion ↑, Costco's own low-markup pricing philosophy is a structural governor on margin, even in a bull case ↓
Measured by
- Operating margin, full fiscal year3.9%derived
- Membership fee income growth, YoY (quarterly)10.7%reported
Evidence for
- Executive members, who pay higher fees and tend to spend more, represented 73.6% of Costco's worldwide net sales in FY2025.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Evidence against
- Costco has publicly emphasized capping merchandise markups to keep prices low for members, a self-imposed ceiling on margin expansion regardless of scale.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Tax rate24.5%low
How derived: FY2024's effective tax rate was 24.4%, slightly below FY2025's 25.1%; the bull case assumes continued equity-compensation tax benefits and favorable geographic mix pull the rate back toward the FY2024 level rather than continuing to climb.
Why this confidence: Value is anchored to an actual, recently reported fiscal year rate rather than an invented number ↑, Recent direction of travel in the reported rate is the opposite of what this case assumes ↓
No tracked driver measures this assumption yet.
Evidence for
- FY2024's effective tax rate (24.4%) was lower than FY2025's (25.1%), showing the rate has recently been as low as the bull case assumes.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Evidence against
- The trend between the two most recent fiscal years was upward, not downward, which argues against reverting to the lower FY2024 rate.[Costco FY2025 Form 10-K (SEC EDGAR)]· primary
Reinvestment rate55.0%low
How derived: The bull case assumes Costco leans into its growth opportunity, pushing capex intensity above the current ~$6.5B/2.3%-of-revenue FY2026 guidance to accelerate the net-new-warehouse pace beyond the ~28/year currently planned, raising the share of NOPAT reinvested to roughly 55%.
Why this confidence: Assumes spending above what management has actually guided ↓, Actual year-to-date warehouse additions are running at a brisk pace consistent with continued high investment ↑
Measured by
Evidence for
- Costco added 17 net new warehouses in under nine months of FY2026 (914→931), already tracking near the high end of its full-year guidance pace.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Evidence against
- Management's stated FY2026 capex plan is $6.5B, not a higher figure, so assuming materially faster spending goes beyond current guidance.[Costco Targets $6.5B Capex, ~28 Net New Warehouses FY2026 (Yahoo Finance)]· secondary
Terminal growth3.2%low
How derived: The bull case assumes Costco's international unit growth (292 of 931 warehouses outside the US/Puerto Rico as of Q3 FY2026) and digital penetration keep compounding above the broader economy indefinitely, supporting terminal growth modestly above long-run nominal GDP, around 3.2%, still below the current risk-free rate.
Why this confidence: Terminal assumptions decades out are inherently the least verifiable input in the model ↓, International warehouse count is still small relative to total, leaving genuine multi-decade runway ↑
No tracked driver measures this assumption yet.
Evidence for
- Costco operates in 13 countries outside the US and Canada with room to keep adding units, per its Q3 FY2026 warehouse count disclosure.[Costco Q3 FY2026 Operating Results (8-K, SEC EDGAR)]· primary
Evidence against
- A terminal growth rate above long-run nominal GDP is aggressive for a mature retailer and, if sustained forever, would imply Costco eventually becomes an implausibly large share of the economy.[Daily Treasury Par Yield Curve Rates (US Treasury Dept.)]· estimate
Valuation robustness
reliability of the estimate, not a stock rating72 / 100 · Strong
Formula v1.0.0. Higher means a more reliable estimate — not a recommendation.
Quality checks
Automated model-risk flags — warnings, not recommendations.
- 73% of the intrinsic value rests on the terminal value — a small change to terminal growth moves the valuation a lot.→ terminal growth
Per-share economics
Business growth after changes in the diluted share count.
| Period | Revenue growth | FCF/share | FCF/share growth | Shares | Share growth |
|---|---|---|---|---|---|
| Q1 2024 | 6.2% | 8.13 | 132.6% | 444.4M | -0.0% |
| Q2 2024 | — | -0.67 | — | 444.75M | — |
| Q1 2025 | 7.5% | 4.49 | -44.8% | 444.89M | 0.1% |
| Q2 2025 | 9.0% | 3.62 | 636.8% | 444.89M | 0.0% |
| Q1 2026 | 8.3% | 7.11 | 58.6% | 444.52M | -0.1% |
| Q2 2026 | 9.2% | 3.84 | 6.1% | 444.42M | -0.1% |
Valuation history every run
History builds as the valuation is recalculated — this is the first recorded run.
Market inputs researched
Used the most recent 10-year US Treasury yield as the risk-free rate proxy for a USD-denominated DCF.
Adopted GuruFocus's most recently reported beta for Costco (as of Jul. 13, 2026), reflecting its historically low volatility relative to the market as a defensive membership-retail business.
Used Professor Damodaran's latest forward-looking implied equity risk premium for the US market as of mid-2026.
Current traded share price as of the analysis date, used to translate the DCF's per-share intrinsic value into an implied premium/discount versus the market.
Generated 9/5/2026, 4:19:57 PM · pipeline v1.2.0