Stock Recommendation: Wholesale retail giant (Costco:COST)

introduction

Costco is well protected by loyal businesses and savvy retail customers. Their monthly subscription guarantees a foundation income and encourages customers to return and spend regularly. The out of the way locations Costco operates encourage customers to buy in bulk and keep rent cheap.

Revenues grow staggeringly fast with incredible consistency. Costco is currently the 3rd largest retailer in the world. Its no wonder pop culture from the late 00's such as Idiocracy (2006) & Wall-E (2008) frequently predicted this company assuming absolute world dominance.

Because of its high growth expectation, costco is afforded a large PE and PEG ratio which on paper would make it look overpriced, take a look at the PS of 1 as well as annual revenue growth of 16.56% and it becomes apparent that costco is heavily reinvesting its earnings & is highly growthy.

Costco has a significant growth runway for the future too, it has proven its business model to work in United States, Puerto Rico, Canada, Mexico, Japan, United Kingdom, Korea, Taiwan, Australia, Spain, France, China, and one in Iceland. There is still enormous room for growth as most households worldwide live nowhere near a Costco.

Another headwind could possibly be the cost of living crisis forcing people to be more economical with their shopping habits, buying items in bulk rather than sporadically from the local shop.

Some financials

NOTE: metrics are at the time of writing and aren't updated

Caveats

Costco faces competition from other retail stores (especially walmart's "Sam's club") and online competition. Its weaknesses include exclusivity to members and low profit margins. Despite this, it can be considered a safe stock.

Sources

Freetrade
FT
Costco investor relations
Panmore