March 14, 2024
Top 10 Stock Costco Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Costco – Top 10 Stock in S&P 500 Consumer Staples Index
Costco is listed as a top 10 stock on March 14, 2024 in the market index S&P US Consumer because of its high performance in at least one of the Obermatt investment strategies. Three consolidated Obermatt Ranks are above-average. Only the Value Rank is below average. The investment rationale may be an investment in future growth, supported by professional market opinion. Based on the Obermatt 360° View of 93 (top 93% performer), Obermatt assesses an overall strong buy recommendation for Costco on March 14, 2024.
Snapshot: Obermatt Ranks
| Country | USA |
| Industry | Hypermarkets, Super Centers |
| Index | NASDAQ 100, NASDAQ, S&P US Consumer, S&P US Food & Beverage, S&P 500 |
| Size class | XX-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Costco Strong Buy
| 360 METRICS | March 14, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 16 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 78 |
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| SENTIMENT | ||||||||
| SENTIMENT | 98 |
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| 360° VIEW | ||||||||
| 360° VIEW | 93 |
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ANALYSIS: With an Obermatt 360° View of 93 (better than 93% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock Costco are very positive. The 360° View is based on consolidating four consolidated indicators, with all but one indicator above average for Costco. The consolidated Growth Rank has a good rank of 95, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth, as well as stock returns. This means that growth is higher than for 95% of competitors in the same industry. The consolidated Safety Rank at 78 means that the company has a financing structure that is safer than 78% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. Finally, the consolidated Sentiment Rank has a good rank of 98, which means that professional investors are more optimistic about the stock than for 98% of alternative investment opportunities. But the consolidated Value Rank is less desirable at 16, meaning that the share price of Costco is on the higher side compared with indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 84% of alternative stocks in the same industry. ...read more
RECOMMENDATION: With a consolidated 360° View of 93, Costco is better positioned than 93% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as above-average growth (Growth Rank of 95), a safe financing structure (Safety Rank of 78), and positive professional market sentiment (Sentiment Rank of 98), it is a solid stock investment where growth may be the strongest driver of the investment rationale, also reflected by institutional investors. It is typical for growth companies to have low value, as is the case here. Investors are willing to pay more for companies that outperform their competitors. So the question is, how much more do you pay for the stock of Costco compared with alternatives? You can use the following rule of thumb: The growth rank measures the growth momentum of the company (95% better than peers). The value rank could be the reverse reflection of that (5%). A Value Rank below that level may be assessed as expensive, a rank above that is still good value. Sometimes market sentiment just reflects the past, sometimes the reality. You pay more than the market average for this stock, but it may be worth it. ...read more
Sentiment Strategy: Professional Market Sentiment for Costco very positive
ANALYSIS: With an Obermatt Sentiment Rank of 98 (better than 98% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Costco is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Costco. Analyst Opinions are at a rank of 73 (better than 73% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 95, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in Costco. The Professional Investors rank is 82, which means that currently, professional investors hold more stock in this company than in 82% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 75 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 75% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 98 (more positive than 98% compared with investment alternatives), Costco has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean Costco stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: Costco Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 16 (worse than 84% compared with alternatives), Costco shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for Costco. Only the metric dividend yield has an above-average rank, reflecting that dividend practices are expected to be higher than 51% of comparable companies, making the stock an attractive buy for dividend investors. However, dividend investors may get disappointed because all other critical financial indicators are below the market median: Price-to-Sales is 31 which means that the stock price compared with what market professionals expect for future profits is higher than 69% of comparable companies, indicating a low value concerning Costco's sales levels. The same is valid for Price-to-Profit (also referred to as price-earnings, P/E) with a rank of 11 which means that the stock price compared with what market professionals expect for future profit levels is higher than 89% of comparable companies. In addition, Price-to-Book (also referred to as market-to-book ratio) with a Price-to-Book Rank of 3 is also low. Compared with invested capital, the stock price is higher than for 97% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 16, is a sell recommendation based on Costco's stock price compared with the company's operational size and dividend yields. Should dividend investors pick Costco? The company-reported financials speak against it. The company is expensive compared with revenue and invested capital levels, two reliable company size indicators. In addition, it currently has a low level of profits. How can future dividends be paid in the case that profits remain low? Dividend investors should choose Costco only if they reasonably expect the low current profit levels to be transitory. ...read more
Growth Strategy: Costco Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 95 (better than 95% compared with alternatives) for 2024, Costco shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all four indicators above average for Costco. Sales Growth has a value of 77, which means that, currently, professionals expect the company to grow more than 77% of its competitors. The same is valid for Profit Growth with a value of 77 and for Capital Growth with 55. In addition, Stock Returns had an above-average rank value of 89, which means they have been higher than 89% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 95, is a buy recommendation for growth and momentum investors. Since all Growth Ranks are positive, Costco exhibits above-average growth momentum. This could be due to a uniquely strong market position, proprietary technology, or an extensive corporate acquisition strategy. Growth investors will find this an attractive investment opportunity, unless they expect that the current phase is transitory and will deteriorate in the future. The current performance could also be a temporary recovery from a very low point, such as a turn-around situation. In the case of a turn-around, the current performance may or may not be followed by a continuing positive development. ...read more
Safety Strategy: Costco Debt Financing Safety very solid
| SAFETY METRICS | March 14, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 67 |
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| REFINANCING | ||||||||
| REFINANCING | 20 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 100 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 78 |
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ANALYSIS: With an Obermatt Safety Rank of 78 (better than 78% compared with alternatives) for 2024, the company Costco has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Costco is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with two out of three indicators above average for Costco. Leverage is at a rank of 67, meaning the company has a below-average debt-to-equity ratio. It has less debt than 67% of its competitors. Liquidity is also good at a rank of 100, meaning the company generates more profit to service its debt than 100% of its competitors. This indicates that the company is on the safer side when it comes to debt service. But Refinancing is lower at a rank of 20, which means that the portion of the debt that is about to be refinanced is above-average. It has more debt in the refinancing stage than 80% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 78 (better than 78% compared with alternatives), Costco has a financing structure that is significantly safer than that of its competitors. The refinancing issues could be a short-term problem, especially if the company has reputation issues. Banks and investors don't like to refinance debt if there are clouds on the horizon. For this reason, investors should look at the refinancing environment for Costco. Does it look safe that debt that is coming due can be covered with new debt? If that is the case, then the financing situation of the company is on the safer side. If not, it may be better to wait until refinancing has been completed and the Refinancing rank is good again. ...read more
Combined financial peformance: Costco Top Financial Performance
| COMBINED PERFORMANCE | March 14, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 16 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 100 |
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| COMBINED | ||||||||
| COMBINED | 78 |
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ANALYSIS: With an Obermatt Combined Rank of 78 (better than 78% compared with investment alternatives), Costco (Hypermarkets, Super Centers, USA) shares have much better financial characteristics than comparable stocks. Shares of Costco are low in value (priced high) with a consolidated Value Rank of 16 (worse than 84% of alternatives). But they show above-average growth (Growth Rank of 95) and are safely financed (Safety Rank of 78, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 78, is a strong buy recommendation based on Costco's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company Costco exhibits low value (Obermatt Value Rank of 16), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 95). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 78) are a double-edged sword: if the company continues growing, low debt limits shareholder returns. But if the company increases its debt, it will also increase risk. In other words, this is an investment on the safer side, despite the above-average price (low value). ...read more
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