Should You Buy Costco Stock Right Now?

Key Points

• Costco’s huge scale creates a cost advantage when buying merchandise from suppliers.

• The company’s success in the face of the popularity of e-commerce demonstrates its competitive position.

• This is a great business that investors should be paying attention to.

• 10 stocks we like better than Costco Wholesale ›

With $62 billion in net sales in the fiscal 2025 third quarter (ended May 11), Costco Wholesale (NASDAQ: COST) is the world's third-biggest retailer. Only Walmart and Amazon are above it on the leaderboard. Costco is clearly a dominant force in the industry, and investors have been rewarded. Shares have generated a total return of 733% in the past decade (as of Sept. 10).

Should you buy this blue chip stock right now?

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Scale creates an advantage

There is minimal risk that Costco will be disrupted anytime soon. Its massive scale is one important reason why. The previously mentioned revenue figure of $62 billion comes from an average of 4,000 stock-keeping units (SKUs) sold in the company's warehouses. This is much less than the 30,000 that a typical supermarket sells. Therefore, Costco sells a large volume of a limited number of goods.

This creates a powerful cost advantage. The company has negotiating leverage with its suppliers. This results in low costs that are always passed on to shoppers. These customers are happy, with memberships up 6.8% year over year in Q3 and a worldwide renewal rate of 90.2%.

Price check on Costco stock

Costco is a safe and reliable company that investors should always keep in mind. Even better, it continues to open new warehouses, pushing growth. Its ability to keep thriving despite the rise of e-commerce points to its strong competitive standing.

However, now is not a good time to buy shares. They currently trade at a price-to-earnings ratio of 54.2. Put this stock on the watch list for now.

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