Costco Earnings: Top-Line Growth and Membership Trends Remain Enviable, but Shares Still Look Rich

We plan to slightly raise our $510 per share fair value estimate on wide-moat Costco as the warehouse club behemoth capped off an impressive fiscal 2024 that saw companywide comparable sales rise 6% and its operating margin expand by 30 basis points to 3.6%. We think Costco’s strong results speak volumes as to its attractive product assortment and low-cost value proposition, as its strong customer loyalty (membership renewal rates remain above 90%), frugal cost structure, and $2,000 in domestic sales per square foot (about three times that of wide-moat Walmart) remain the envy of the retail industry. While we maintain our optimistic stance regarding Costco’s prospects—we model mid-single-digit percentage growth in comparable sales and continued margin expansion—we still regard shares, trading at around 50 times our fiscal 2025 EPS forecast, as significantly overvalued.