Is Costco Stock Finally Cheap Enough to Buy?
Key Points
Costco is reporting accelerating growth despite the inflationary climate.
The stock is down as the market worries about the future.
Costco stock is cheaper, but it's not cheap.
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Costco Wholesale (NASDAQ: COST) has historically been an expensive stock to buy. The company is so reliable for top performance that the stock's premium was worth it. However, as it surpassed 60 times trailing 12-month earnings, it was starting to look too pricey.
Indeed, the stock is flat since it hit that high, although it's had ups and downs in the middle.
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That P/E ratio may have been a signal for a correction. But at 49 times trailing 12-month earnings, is Costco stock finally cheap enough to buy?
Image source: Getty Images.
Why investors love Costco
Costco consistently reports robust growth, and it has some of its best performance when times have been tough. That's what's been happening today.
In the company's 2026 fiscal third quarter (ended May 10), sales increased 11.6% year over year, while comparable sales (comps) were up 9.4%. Despite rising costs, profitability remains strong, with earnings per share (EPS) up from $4.28 to $4.93.
And if that wasn't enough, Costco just reported its May results, which were even better. Revenue increased 14.5% year over year, and comps were up 12.5%. Costco provides only a limited slate of metrics for the monthly reports.
Costco's reliable membership model generates loyalty and volume, and its rock-bottom prices drive higher sales when customers are penny-pinching. It earns its $65 per annual membership fee, or $130 per executive membership, no matter what, providing reliable recurring revenue.
Love can only go so far
It's this kind of performance that has investors clamoring for the stock despite the high price. The company is resilient, and the stock is expected to be, too. That theory changes, though, as the valuation climbs, because the high price itself makes it susceptible to a correction. That's what's been happening lately.
Costco stock is down 13% this year, even as the S&P 500 has hit record highs. At a P/E ratio of 49, it's only slightly lower than the three-year average of 52.
There could be more pressure on Costco stock in the near term, as the market expects volatility going forward as inflation persists. But this could be one of the dips that are likely to occur, so if you have a long-term investing approach and many years to hold, you could feel comfortable buying Costco stock at the current price.
Should you buy stock in Costco Wholesale right now?
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
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