Overview
- A $1,000 Costco investment 10 years ago would be about $6,400 with dividends reinvested, versus roughly $4,000 for an S&P 500 index fund.
- Much of that outperformance came from multiple expansion, with the price-to-earnings ratio rising more than 50% since 2015 to about 46 times trailing earnings.
- The stock’s current valuation is characterized as high, raising the risk that upside could be limited over the next few years.
- Costco reports a sizeable and growing membership base of 146 million cardholders, with earnings increasing around 10% year over year and a long-term growth outlook near 9%.
- If the valuation remains near 46 times earnings, a $1,000 purchase today is projected to reach about $2,600 in a decade, excluding dividends.