If You Buy Costco With $5,000 at a 43% Discount From Its High, Here's What I Predict It Could Be Worth in 10 Years.

Costco (NASDAQ: COST) proves that boring is beautiful. The company, which enables shoppers to buy bulk quantities of quality merchandise, dominates the warehouse club industry. It's not as exciting as what you might find in other sectors. However, shares have crushed the market, rising 584% in the past decade (as of Oct. 22).

The retail stock hit its all-time high of $1,094.32 in May 2026. But it now trades 7% off that mark. If you have an opportunity to buy $5,000 worth of shares at a 43% discount to that peak price, here's what I predict this position could be worth in 10 years.

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Costco stock's fair value

I don't believe it's unreasonable to say that Costco is an overvalued stock right now. Its price-to-earnings (P/E) ratio sits at 49. This is 109% more expensive than the S&P 500 (SNPINDEX: ^GSPC). Even more notable is that Costco shares trade at an 82% premium to Nvidia, the dominant artificial intelligence hardware business whose sales and net income have been skyrocketing.

In my opinion, a fair multiple for Costco is a P/E ratio of 30. That's still not exactly cheap. However, the market likely views the company favorably, given its stability and predictability over such a long time.

Applying a P/E multiple of 30 to last fiscal year's earnings results in a fair value of $623. This represents a 43% discount to the record high of $1,094.32. Shares last traded near that fair value level nearly three years ago in December 2023.

The stock may never revisit that price unless the economy is in a severe recession or the company makes a massive strategic blunder. The main reason is that Costco's business continues to perform well.

Investors should understand that unsustainable trends can persist for much longer than expected. In the past 10 years, the cheapest valuation that Costco traded at was a P/E ratio of 25. The market always seems to place a premium on the shares. It's impossible to know if this sentiment will ever degrade.

Earnings growth will power the stock's performance

Let's assume that the market allows you to buy the large-cap stock at an estimated fair value of $623. The smart move would be to pounce on the chance to acquire a high-quality company after it has fallen by so much. I predict that over the following 10 years, a $5,000 investment would grow to $15,530. This translates to a hypothetical 12% annualized rate of return.

It's best not to factor in valuation expansion. Nobody can forecast with any level of certainty what P/E multiple the shares will go for far into the future. The conservative view is to focus strictly on the fundamentals.

That being said, profit growth will be the chief catalyst. And numerous tailwinds will contribute to the bottom-line gains.

Physical expansion is one. Costco opened 25 net new warehouses in fiscal 2026. Management set a goal to open 30 stores annually in the future, with white space in the U.S. and internationally.

Each warehouse is more productive. Same-store sales seem to march higher with each passing quarter. Furthermore, Costco can expand its membership base, which is currently 84.1 million households

Membership fee hikes introduce another profit driver. Before the last increase in September 2024, the business raised the annual dues in June 2017. Given the strong U.S. and Canada renewal rate of 92%, customers still find tremendous value.

Diluted earnings per share increased by 14.6% from fiscal 2016 to fiscal 2026. It's reasonable to assume the growth rate will decline to 12% over the next 10 years. At a P/E ratio of 30, the stock will trade at $1,935 in October 2036, turning $5,000 into $15,530.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Nvidia. The Motley Fool has a disclosure policy.