Costco's profit is growing about 10% a year, but at 46 times earnings the stock needs that to continue while the multiple holds. My target is $951, about 1% above the price. That is a hold.
Key points
- 46 times trailing earnings: $942 divided by $20.61 of fiscal 2026 EPS, excluding a one-time $0.15 tariff refund.
- 9.5% a year is my EPS growth estimate for fiscal 2027 and 2028, close to the 14% fiscal 2026 pace slowing.
- $951 target, 1% above the price: the hold band.
The call
The price requires steady compounding with no de-rating. At 42 times fiscal 2027 profit, the market pays for roughly 10% annual EPS growth to continue. Sales are strong: September comparable sales rose 7.6% excluding gasoline and currency.
I expect good growth but a slightly lower multiple. The membership-fee increase benefit has ended. Paid memberships grew 3.8%, slower than before. Profit growth should ease from 14% to about 9.5%, which supports roughly 38.5 times earnings, not 46.
Diluted EPS by fiscal year ($ per share)Source: Costco 10-K via SEC XBRL; FY27E and FY28E are my estimates (9.5% growth on EPS excluding $0.15 refund)
Valuation
| Item | Figure |
|---|
| Fiscal 2026 EPS, ex refund | $20.61 |
| Fiscal 2027 EPS (my estimate) | $22.57 |
| Fiscal 2028 EPS (my estimate) | $24.71 |
| Multiple on fiscal 2028 EPS | 38.5 times |
| Target, 12 months | $951 a share |
I value the stock on fiscal 2028 profit, which is what a buyer pays for in October 2027. Costco has earned a premium multiple for steady growth, retention near 90% and a strong balance sheet with $20 billion of cash. At 42 times the value is $1,038, and at 33 times it is $815. That is about 10% up against 13% down, so the risk is balanced.
Risks
- Slower membership growth: watch paid memberships, now 3.8% growth, and renewal rates near 92.3% in the US and Canada.
- Price cuts to drive sales could squeeze margins: watch the merchandise gross margin, 11.02% last quarter.
- Upside: a special dividend or faster comparable sales could hold the multiple above 42 times: watch monthly sales reports.
What would change my mind
A fall in comparable sales growth below 5% would make me a seller, while EPS growth above 12% for two quarters would make me a buyer.