2024-03-28 03:57:25 ET
Summary
- Costco's value proposition has generated exceptional financial metrics.
- Great companies are often over-priced relative to their intrinsic value, and this is often the case for Costco.
- Costco's total shareholder returns are comparable to the "Magnificent 7" group of stocks.
- This has resulted in Costco's relative pricing multiples being very comparable to the "Magnificent 7" and the question should be asked is this deserved.
- Costco stockholders should continue to enjoy the benefits of price momentum but should prepare for when price converges back to value.
The Market Loves Costco
Although not mentioned in the same breath as the "Magnificent Seven", Costco ( COST ) deserves to be in their esteemed company based on the outstanding total shareholder returns that it has consistently delivered to long time stockholders:
Every year I develop an intrinsic value for Costco. Here is a link to my last valuation Costco: Great Company but Expensive.
Based on the company's underlying revenue growth and operating margins I found that Costco was significantly over-priced. I am reminded of Benjamin Graham’s classic quote “in the short run, the market is a voting machine, but in the long run it is a weighing machine”.
In the case of Costco, great companies can remain over priced for long periods of time. ...
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For further details see:
Costco: Should The Magnificent 7 Be Expanded?