Why Costco Stock Just Popped

Costco Wholesale (NASDAQ: COST) stock jumped 3% through 10:30 a.m. ET Friday after the company beat analyst forecasts for fiscal third quarter 2025 sales and earnings.

Heading into last night's report, analysts forecast Costco would earn $4.23 per share on $63.1 billion in quarterly sales. In fact, Costco earned $4.28 per share, and sales were $63.2 billion.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Image source: Getty Images.

Costco Q3 earnings

Costco's sales grew 8% to $62 billion. With $1.2 billion in membership fees added in, total revenue was $63.2 billion -- also up 8%. Selling, general, and administrative expenses outran sales growth, rising more than 10%, which isn't great. But surprisingly, despite all the tariffs turmoil of the last few months, merchandise costs rose less than 7.5%, allowing Costco to grow its operating income nicely -- up 14%.

On the bottom line, Costco's $4.28 in per-share profit increased 13%.

Free cash flow (FCF) grew nicely as well, and is now up 13% to $5.9 billion for the fiscal year to date, eclipsing reported earnings of $5.5 billion over the last nine months.

Is Costco stock a buy?

Tallying up the latest numbers, financial data provider S&P Global Market Intelligence tells me this is an improvement. Over the past 12 months, Costco's FCF was only $6.9 billion, so less than reported net income of $7.6 billion. Relative to the stock's $459.2 billion market cap, this means Costco stock costs 66.6 times trailing FCF, but only 60.4 times trailing earnings.

Is that too expensive to buy, considering the stock is only growing profits and free cash flow in the mid-teens? In my humble opinion, it is too expensive, which is why I don't own Costco stock.

It's also why I'm not benefiting from Costco stock going up 3% today.

Should you invest $1,000 in Costco Wholesale right now?

Before you buy stock in Costco Wholesale, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Costco Wholesale wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $638,985!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $853,108!*

Now, it’s worth noting Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 19, 2025

Rich Smith 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.