Costco Stock Is 14% Below Its Record. History Says Buyers Have Usually Been Rewarded.

Shares of membership-based retailer Costco Wholesale (NASDAQ:COST) closed at a record $1,094.32 on May 19. As I write, they trade near $942, about 14% below that peak.

Drops like this aren't new to Costco, and they've usually worked out for buyers. Counting from 2010 and using closing prices adjusted for dividends, Costco shares had fallen at least 14% from a record close nine times before this latest slide. A year after each drop first hit 14%, the stock was higher in seven of those.

Costco's latest sales update might give buyers a new reason to look, too. On Wednesday, Oct. 7, the retailer said that its comparable sales excluding gas and currency climbed 7.6% in September, up from 5.4% in August. And this eases the main worry I had about the business a week ago.

Image source: The Motley Fool. Image source: The Motley Fool.

Past dips have mostly paid off

For all nine drops, the median return a year after the stock first stood 14% below its record was around 21%, and the best, in 2021, was about 58%.

The two exceptions both came in 2022. A year after the stock's January and May drops, shares were down around 1% and 3%, respectively.

And it wasn't because the company stumbled. In fiscal 2022, which ended Aug. 28, 2022, Costco's comparable sales excluding gas and currency climbed around 11%, and its earnings per share grew about 17%. The stock fell anyway. In other words, its price-to-earnings ratio shrank.

It's worth noting that the record before 2010 is weaker. From 2000 through 2009, seven drops this big left the stock higher a year later just twice, in a stretch that included the dot-com bust and the 2008 financial crisis.

Did September stop the slowdown?

Costco's September report covered the five weeks ending Oct. 4, 2026, which started its fiscal 2027. Net sales climbed 13% year over year to around $30 billion.

But the number I follow most closely is comparable sales excluding gas and currency. It covers sales at warehouses and online businesses operating for over a year and removes swings in fuel prices and exchange rates, giving a clearer idea of how much more members are buying. That measure rose 7.6% in September, its fastest rate since May's 8% gain. In between, it slowed every month, slipping to 5.4% in August after 7% in June and 6.6% in July.

Some of the pickup comes from Labor Day, which was a week later than in 2025. Costco said the timing added a bit over 0.5 percentage points to September's comparable sales, after costing August a little less than 0.75 points. But even with both months adjusted for the holiday, the underlying rate rose from around 6% to about 7%.

The U.S. business did even better, with adjusted comparable sales up 8% in September against 5.6% in August. And the U.S. rise came on top of 5% adjusted growth in September 2025, so this wasn't just an easy comparison.

In my Oct. 4 piece, I wrote a September result around 7% might mean the slowdown had leveled off. It beat that.

Today's price looks more like 2022

Costco's earnings per share grew 14% in fiscal 2026 (ended Aug. 30, 2026) to $20.76. At roughly $942, shares cost about 45 times those earnings.

The starting valuation differed a lot among those nine past drops, and it seems to have mattered. Based on the previous fiscal year's earnings per share, the six drops that began under 40 times earnings were all followed by gains a year later, running from about 19% to 58%. The three that started over 40 times earnings (the two in 2022 and one in 2025) saw one gain of about 14% and two small losses.

Sure, nine drops is a small sample, so I wouldn't read too much into that split. But today's price-to-earnings ratio of around 45 looks far more like the 2022 starting points, at about 43 and 46 times earnings, than the cheaper ones before them.

The sales slowdown I worried about a week ago reversed in September, which makes the case for the business stronger. The stock's valuation, though, is around where it was.

In the end, I think Costco's track record after big drops and its improving sales trend make the stock worth a look today. But because shares still cost around 45 times earnings, I'd buy gradually over the coming months rather than all at once. And I wouldn't count on a gain as big as the ones that followed the cheaper drops.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.