Is Costco Stock Worth Buying Now or Still Too Pricey to Touch?

Costco Wholesale Corporation COST, a prominent player in the membership-based retail industry, is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 42.91, which positions it at a premium compared to the industry’s average of 31.06 and the S&P 500's 20.69. The premium reflects investors' confidence in the company's membership-driven business model, recurring fee income, resilient sales growth and disciplined execution.

This premium positioning is particularly noticeable when compared to peers like Ross Stores, Inc. ROST, Dollar General Corporation DG and Target Corporation TGT. While Ross Stores trades at a forward 12-month P/E multiple of 30.07, Dollar General and Target trade at 15.82 and 18.07, respectively.

However, Costco is trading below its 12-month median P/E of 45.81. This suggests that although the stock is slightly cheaper than its recent historical average, it remains an expensive stock in a broader market context.

COST Valuation Picture

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Costco’s Share Price Pullback Eases Valuation

Shares of Costco have declined 8.5% over the past three months, bringing the stock’s valuation below its 12-month median. The pullback has coincided with some moderation in comparable sales growth from May’s pace. Companywide comparable sales increased 8.9% in July, following gains of 8.8% in June and 12.5% in May. While sales growth remains healthy, the deceleration from May’s robust level may have tempered investor enthusiasm around the stock’s premium valuation.

Over the same period, Costco also underperformed its peers. Shares of Target have rallied 27.9%, while Dollar General and Ross Stores have gained 19.2% and 15.1%, respectively. The divergence is notable, given that Costco continues to trade at a substantial valuation premium to all three retailers.
 

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Factors Supporting Costco’s Premium Valuation

Costco’s premium valuation is supported by the strength and consistency of its business model. The company continues to attract shoppers through competitive pricing, high-quality merchandise and a carefully curated product assortment. This value-focused strategy has helped Costco maintain strong customer loyalty and sustain sales growth across markets, even when consumer spending trends are uneven.

Its membership model remains a key competitive advantage. High renewal rates provide a steady stream of recurring fee income, while the growing Executive Membership base supports higher engagement and spending. Executive memberships reached 41.2 million at the end of the third quarter of fiscal 2026, up 9.6% year over year, and these members accounted for about 75% of worldwide sales. Growth in this tier is being supported by upgrades from Gold Star members as well as more new customers choosing Executive Membership at sign-up.

Costco is also strengthening its digital capabilities while preserving the efficiency of its warehouse model. Investments in its mobile app, e-commerce platform, checkout technology and same-day delivery are making shopping more convenient and improving customer engagement. The company is also using personalization and artificial intelligence to improve the shopping experience, while retail media offers another potential avenue for profitable growth.

Expansion provides another long-term growth driver. Costco continues to add warehouses in North America and international markets while relocating some high-volume locations to larger sites with better capacity and additional services. Investments in logistics, manufacturing and technology are also supporting operational efficiency. Management expects 26 net new openings in fiscal 2026 and sees further expansion opportunities across several international markets, providing Costco with additional room to grow its membership base and sales over time.

Costco Navigates a Competitive Landscape

Costco's impressive sales figures are part of a larger retail picture where competition is intensifying. Rivals like Ross Stores, Dollar General and Target are investing in expanding their capabilities and enhancing customer experience. 

Margins remain a critical area to monitor, with potential concerns stemming from any deleverage in the selling, general and administrative rate. Foreign exchange volatility, potential tariffs on key imports and inflationary pressure create uncertainty.

How Consensus Estimates Stack Up for Costco

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 9.7% and 13.5%, respectively. For the next fiscal year, the consensus estimate indicates a 7.8% rise in sales and 10.2% growth in earnings.

While the consensus estimate for earnings per share for the current fiscal year has remained stable at $20.42 over the past 30 days, the same for the next fiscal year has risen by a penny to $22.51.
 

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Costco: A Quality Stock but a Hold for Now

Costco remains a high-quality retailer with a resilient membership model, strong customer loyalty, expanding digital capabilities and ample room for warehouse growth, all of which support its long-term prospects. However, these strengths appear largely reflected in the stock’s premium valuation, while moderating sales momentum, competitive pressures and margin-related risks leave limited room for disappointment. The recent pullback has made COST somewhat more attractive, but not enough to remove the valuation concern. Existing investors may, therefore, continue to hold the stock and benefit from Costco’s durable growth prospects, while potential investors may be better served waiting for a more attractive entry point rather than chasing the shares at current levels. 

Costco currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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