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Why Costco (COST) Stock Hit A New High Thursday

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Costco (COST - Free Report) saw its stock price close up 2.48% on Thursday, touching a new all-time high of $202.88 per share after the company released strong May sales numbers. Let’s dive into some of the details that impressed investors as Costco counties to prove its strength against the likes of Walmart (WMT - Free Report) and Amazon (AMZN - Free Report) .

Costco’s May sales surged 14.1% to $11.02 billion, up from $9.66 billion in the same month last year. The big-box discount retail powerhouse’s comparable store sales climbed 11.7%, up 2% from the year-ago period’s 9.7% expansion. Maybe more impressively, the company’s e-commerce sales soared 34.4%, down slightly from its 35.9% surge in May 2017.

This growth clearly impressed investors and comes on the back of the strong third-quarter fiscal 2018 results Costco reported last week. Costco posted adjusted earnings of $1.70 per share, beating the Zacks Consensus Estimate of $1.51 per share.        

Meanwhile, the company’s revenue figures grew by 12% to $32.36 billion, topping our consensus estimate of $31.74 billion. Furthermore, the wholesale retail giant’s quarterly e-commerce sales surged 36.8%, with comps up 10.2% overall, which looks very impressive compared to Walmart’s quarterly U.S. same-store sales expansion of just 2.1%.

Now let’s take a quick look at Costco’s recent price performance that helped it reach this new all-time high.

Price Performance

Shares of Costco have surged nearly 84% over the last five years, which tops the S&P 500’s roughly 73% climb. Investors should also note that Costco crushed Walmart’s 11% gains over this stretch. Over the last three years, COST stock has climbed approximately 47%, which once again outpaces the S&P 500’s roughly 33% growth and WMT’s 17%.

 

Clearly, shares of Costco have also performed well since the start of the year, helping it hit its brand new all-time high.  

Valuation

With that said, investors have clearly been willing to pay a premium for Costco stock over the last five years. Coming into Thursday, COST was trading at 26.5X forward 12-month Zacks Consensus EPS estimates, marking a premium compared the S&P 500’s 17.1X, as well as Walmart’s—which is currently trading at the same forward P/E as the index. 

Over the last year, Costco has traded as high as 28.9X and as low as 23.6X, with a year-long median of 26.1X. Therefore, although Costco stock is not the cheapest out there, its valuation is hardly stretched at the moment.

Looking ahead, Costco’s full-year revenues are projected to climb over 8% to $139.68 billion, based on our current Zacks Consensus Estimates. Moving onto the other end of the income statement, COST is projected to see its adjusted fiscal 2018 earnings hit $6.85 per share, which would mark a nearly 18% surge.

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