Amidst today's fast-paced and highly competitive business environment, it is crucial for investors and industry enthusiasts to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Costco Wholesale COST in comparison to its major competitors within the Consumer Staples Distribution & Retail industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in the industry.
Costco Wholesale Background
Costco operates a membership-based, no-frills retail model, predicated on offering a select product assortment in bulk quantities at bargain prices. The firm avoids maintaining costly product displays by keeping inventory on pallets and limits distribution expenses by storing its inventory at point of sale in the warehouse. Given Costco's frugal cost structure, the firm is able to price its merchandise below competing retailers, driving high sales volume per warehouse and allowing the retailer to generate strong profits on thin margins. Costco operates over 600 warehouses in the United States and enjoys over 60% market share in the domestic warehouse club industry. Internationally, Costco operates another 270 warehouses, primarily in markets such as Canada, Mexico, Japan, and the UK.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Costco Wholesale Corp | 53.28 | 17.50 | 1.51 | 7.9% | $2.84 | $7.34 | 9.07% |
| Walmart Inc | 29.21 | 6.74 | 0.84 | 6.18% | $10.88 | $40.08 | 6.05% |
| Target Corp | 16.30 | 4.86 | 0.63 | 6.91% | $2.04 | $7.08 | -3.12% |
| Dollar General Corp | 18.87 | 4.07 | 0.73 | 5.28% | $0.78 | $2.99 | 6.11% |
| BJ's Wholesale Club Holdings Inc | 22.18 | 7.44 | 0.57 | 7.44% | $0.22 | $0.88 | 4.14% |
| Pricesmart Inc | 20.06 | 2.23 | 0.52 | 3.6% | $0.08 | $0.22 | 13.11% |
| Sendas Distribuidora SA | 19.05 | 2.82 | 0.19 | 1.29% | $1.15 | $2.8 | 14.08% |
| Almacenes Exito SA | 66.01 | 0.45 | 0.14 | -0.61% | $245.5 | $1321.95 | -3.32% |
| Average | 27.38 | 4.09 | 0.52 | 4.3% | $37.24 | $196.57 | 5.29% |
Through an analysis of Costco Wholesale, we can infer the following trends:
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At 53.28, the stock's Price to Earnings ratio significantly exceeds the industry average by 1.95x, suggesting a premium valuation relative to industry peers.
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The elevated Price to Book ratio of 17.5 relative to the industry average by 4.28x suggests company might be overvalued based on its book value.
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With a relatively high Price to Sales ratio of 1.51, which is 2.9x the industry average, the stock might be considered overvalued based on sales performance.
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With a Return on Equity (ROE) of 7.9% that is 3.6% above the industry average, it appears that the company exhibits efficient use of equity to generate profits.
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With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $2.84 Billion, which is 0.08x below the industry average, the company may face lower profitability or financial challenges.
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Compared to its industry, the company has lower gross profit of $7.34 Billion, which indicates 0.04x below the industry average, potentially indicating lower revenue after accounting for production costs.
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The company is experiencing remarkable revenue growth, with a rate of 9.07%, outperforming the industry average of 5.29%.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
In light of the Debt-to-Equity ratio, a comparison between Costco Wholesale and its top 4 peers reveals the following information:
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Among its top 4 peers, Costco Wholesale has a stronger financial position with a lower debt-to-equity ratio of 0.43.
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This indicates that the company relies less on debt financing and maintains a more favorable balance between debt and equity, which can be viewed positively by investors.
Key Takeaways
For Costco Wholesale, the PE, PB, and PS ratios are all high compared to its peers in the Consumer Staples Distribution & Retail industry, indicating that the stock may be overvalued. On the other hand, Costco's high ROE and revenue growth suggest strong performance relative to industry standards. However, the low EBITDA and gross profit levels may raise concerns about the company's operational efficiency and profitability compared to its competitors.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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