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There is no doubt about it costco (NASDAQ:Cost) Historically, it has been a great stock. His $170,000 investment 10 years ago is now worth $1 million, which translates to a whopping 488% return (as of January 15th). This crushes broader benefits. S&P500 index.
Can I wear this top? retail inventory Will I become a millionaire in the future? Looking ahead, here’s what investors need to know about Costco’s investment potential.
customer-centric
What really makes this company special is how focused it is on its customers and their needs. The company sells quality products at the lowest prices around, which many people consider to provide a great shopping experience.Typical price increases measured by Costco gross profit is 11%, much lower than other major retailers.
However, to shop at Costco, consumers must pay an annual fee. This is a smart business strategy because membership provides your company with a high-margin recurring revenue stream. In the most recent quarter (Q1 2024 ending November 26), membership revenue increased 8.2% year-over-year. Additionally, our current renewal rate is 92.8% in the US and Canada and 90.5% worldwide, demonstrating just how much value our customers are finding.
strong financial performance
Given Costco’s impressive financial performance, it’s no surprise that it made a huge investment. From FY 2013 to his FY 2023, net revenue grew at an average annual rate of 8.7%. Growth has been surprisingly consistent and stable.
And even more amazing is Costco. Diluted earnings per share (EPS) grew at an annual rate of 11.8% over the last 10 years. This shows that strong earnings are a key factor driving stock returns.
Despite having 872 warehouses around the world, management is optimistic about its growth potential. The company plans to open 31 new stores in 2024, up from 23 stores in 2023. Management is also focused on expansion in China, the world’s second-largest economy.
I think it’s a safe assumption that if we look 10 years from now, Costco will be generating significantly more revenue and profits than it does today. And this is exactly what shareholders want.
Potential for huge profits
Given the above discussion, it would be hard not to like this business. But there are a lot of variables to keep in mind when determining whether this is going to be the stock of the billionaire maker going forward. The first important thing is the initial investment amount. And perhaps more importantly, time horizons matter. People who invest with decades rather than years in mind are more likely to become millionaires.
However, I think the most important factor to keep in mind is the current valuation.As of this writing, Costco stock is price vs. revenue The ratio is 46.6. Not only does this represent a more than 100% premium to the S&P 500, but it’s also higher than Costco’s average valuation of 33.4x over the past 10 years. This limits the stock’s chances of significantly outperforming in the coming years.
On the other hand, a valid argument could be made that Costco deserves a higher rating because of its high quality business. On the other hand, it’s easy to see how optimistic there is around the company. In other words, the stock is priced perfectly right now and investors could be left with nothing. safety range. This is not an attractive setting.
It’s hard to be sure whether Costco can become a billionaire manufacturer stock in the future. But there’s no denying that this is a great company to watch.
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Neil Patel and his clients have no position in any stocks mentioned. The Motley Fool has a position in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
Can Costco Become a Billionaire Manufacturer Stock? Originally published by The Motley Fool
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