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Costco (COST) Gains But Lags Market: What You Should Know

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In the latest trading session, Costco (COST - Free Report) closed at $302.70, marking a +1.17% move from the previous day. This move lagged the S&P 500's daily gain of 3.15%. Meanwhile, the Dow gained 3.85%, and the Nasdaq, a tech-heavy index, added 2.44%.

Coming into today, shares of the warehouse club operator had lost 6.95% in the past month. In that same time, the Retail-Wholesale sector gained 3.53%, while the S&P 500 gained 0.38%.

Investors will be hoping for strength from COST as it approaches its next earnings release, which is expected to be May 28, 2020. The company is expected to report EPS of $1.93, up 2.12% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $37.52 billion, up 7.99% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $8.55 per share and revenue of $163.15 billion. These totals would mark changes of +4.4% and +6.84%, respectively, from last year.

Any recent changes to analyst estimates for COST should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 2.66% lower. COST is currently a Zacks Rank #3 (Hold).

Valuation is also important, so investors should note that COST has a Forward P/E ratio of 35.01 right now. Its industry sports an average Forward P/E of 26.35, so we one might conclude that COST is trading at a premium comparatively.

We can also see that COST currently has a PEG ratio of 4.05. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Retail - Discount Stores was holding an average PEG ratio of 2.81 at yesterday's closing price.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 228, which puts it in the bottom 11% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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