Costco Wholesale (COST:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Costco Wholesale(COST:NAS)

Consumer Defensive:Discount Stores

This Report was generated using the valuation tools available on For a free 30 day trial click here.

Close Price/Date
$222.42 (USD) 29/10/2018

Weighted Valuation
$214.49 (USD)

Overall Rating
Fairly valued to slightly Overvalued by 3.6%

Valuation Models Analyst Consensus: $243.00 (USD)
(in order of importance) Adjusted Book Value: $182.32 (USD)
Multiples: $193.28 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (COST:NAS USD)

Price 222.42
Range 218.75 – 224.89
52 week 161.08 – 244.21
Open 219.75
Vol / Avg. 3.33M/2.83M
Mkt cap 95.61B
P/E 31.37
Div/yield 2.14/0.01
EPS 7.09
Shares 438.21M
Beta 0.95

Company Description

Costco Wholesale Corp is a leading operator of warehouse clubs worldwide. At the end of fiscal 2017, Costco operated 514 membership warehouse clubs in the United States, 97 in Canada, 37 in Mexico, 28 in the United Kingdom, 26 in Japan, 13 each in Taiwan and Korea, 9 in Australia, 2 in Spain, and 1 each in Iceland and France. Costco is the third- largest retailer in the United States, with nearly $130 billion in revenue in fiscal 2017. Base and executive memberships cost $60 and $120 per year, respectively, and give holders access to a limited range of merchandise priced at below-average markups. The company sells food, fuel, and general merchandise to its members, but derives most of its profits from membership fees.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for COST:NAS

Using a discounted cash flow model we generated an intrinsic value of $124.42 (USD) for COST:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

COST:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $124.42 1% 5% 1% 5%
WACC (or Ke) 7.41 $159.47 $101.10
Terminal Growth Rate 2.40 $103.40 $155.95
Tax Rate 0.28 $134.14 $114.71
Cash Flow 6,402,150,400 $114.68 $134.17
Capital Expenditures -2,501,200,000 $120.78 $128.07
Long Term Debt 5,161,000,000 $125.01 $123.83

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $139.90 (USD) for COST:NAS. We also generated a valuation of $229.17 (USD) using other metrics and comparables.
The comparable companies were Dollar General (DG:NYS), Target (TGT:NYS) and Walmart (WMT:NYS).

Company COST:NAS End Date Value
Earnings/Share $7.09 (USD)
Book Value/Share $27.71 (USD)
Sales/Share $315.95 (USD)
Cash Flow/Share $13.72 (USD)
EBITDA/Share $13.67 (USD)
Price Based on Comps Adjustment Factor (%)
$203.63 (USD) -13.8
$116.12 (USD) 1.8
$252.63 (USD) -46.3
$127.25 (USD) -16.1
$160.37 (USD) 3.7
COST:NAS Ratios Used Average Values DG:NYS TGT:NYS WMT:NYS
34.39 PE Ratio 28.72 17.02 15.48 53.66
8.48 PB Ratio 4.19 4.55 4.16 3.86
0.74 PS Ratio 0.80 1.20 0.65 0.55
17.13 PCF Ratio 10.35 13.97 7.12 9.95
17.00 EV to EBITDA 11.73 12.60 8.35 14.25


Using a multiples approach we generated a valuation of  $193.28 (USD) for COST:NAS

Company COST:NAS End Date Value
Earnings/Share $7.09 (USD)
Book Value/Share $27.71 (USD)
Sales/Share $315.95 (USD)
Cash Flow/Share $13.72 (USD)
EBITDA/Share $13.67 (USD)
Price Based on Comps Adjustment Factor
$207.04 (USD) 0
$173.93 (USD) 0
$184.80 (USD) 0
$211.51 (USD) 0
$189.13 (USD) 0
Ratios Ratio Average
PE Ratio 29.20
PB Ratio 6.28
PS Ratio 0.58
PCF Ratio 15.42
EV to EBITDA 13.84

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  COST:NAS for the last 10 years was  6.24

We ran the Adjusted Book Value for  COST:NAS and generated a book value of  $29.21 (USD)
By multiplying these we get an adjusted valuation of  $182.32 (USD)

Analyst Data

In the Stockcalc database there are 7 analysts that provide a valuation for COST:NAS. The 7 analysts have a concensus valuation for COST:NAS for 2019 of $243.00 (USD).

COST:NAS Costco Wholesale

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
6 2 1 4.1111 Outperform 2018-10-26

Current Price: 222.42 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 7.75 8.45 9.45
# EPS Analysts 6 5 1
Mean Revenue 152,097.40 163,256.50 180,510.60
# Revenue Analysts 4 3 1
Mean Target Price 243.00
Mean Cash Flow 12.88 9.66 10.50
Mean EBITDA 6,505.70 5,788.80 6,252.10
Mean Net Income 3,406.80 3,691.40 4,122.90
Mean Debt Outstanding
Mean Tax Rate 28.00 28.00
Mean Growth Rate 9.13
Mean Capital Expenditure 3,764.20 5,035.80 5,415.30

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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