In the fast-paced and highly competitive business world of today, conducting thorough company analysis is essential for investors and industry observers. In this article, we will conduct an extensive industry comparison, evaluating Costco Wholesale COST in relation to its major competitors in the Consumer Staples Distribution & Retail industry. Through a detailed examination of key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and illuminate 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 | 53.95 | 16.76 | 1.56 | 10.37% | $3.87 | $10.11 | 0.96% |
| Walmart Inc | 42.72 | 7.81 | 1 | 5.43% | $10.1 | $42.52 | 4.77% |
| Target Corp | 15.41 | 4.76 | 0.64 | 8.43% | $2.4 | $7.65 | 2.74% |
| Dollar General Corp | 12.62 | 2.46 | 0.45 | 5.25% | $0.79 | $3.06 | 4.23% |
| BJ's Wholesale Club Holdings Inc | 21.71 | 6.89 | 0.57 | 9.11% | $0.27 | $0.96 | 4.87% |
| Pricesmart Inc | 22.48 | 2.58 | 0.58 | 2.96% | $0.07 | $0.21 | 12.11% |
| Sendas Distribuidora SA | 14.73 | 2.02 | 0.14 | 2.58% | $1.34 | $2.95 | 11.81% |
| Almacenes Exito SA | 100.43 | 0.47 | 0.15 | -0.29% | $303.29 | $1299.7 | -0.86% |
| Average | 32.87 | 3.86 | 0.5 | 4.78% | $45.47 | $193.86 | 5.67% |
By thoroughly analyzing Costco Wholesale, we can discern the following trends:
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The current Price to Earnings ratio of 53.95 is 1.64x higher than the industry average, indicating the stock is priced at a premium level according to the market sentiment.
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It could be trading at a premium in relation to its book value, as indicated by its Price to Book ratio of 16.76 which exceeds the industry average by 4.34x.
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The Price to Sales ratio of 1.56, which is 3.12x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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The Return on Equity (ROE) of 10.37% is 5.59% above the industry average, highlighting efficient use of equity to generate profits.
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With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $3.87 Billion, which is 0.09x below the industry average, the company may face lower profitability or financial challenges.
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With lower gross profit of $10.11 Billion, which indicates 0.05x below the industry average, the company may experience lower revenue after accounting for production costs.
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The company's revenue growth of 0.96% is significantly below the industry average of 5.67%. This suggests a potential struggle in generating increased sales volume.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio assesses the extent to which a company relies on borrowed funds compared to its equity.
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.
By analyzing Costco Wholesale in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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When considering the debt-to-equity ratio, Costco Wholesale exhibits a stronger financial position compared to its top 4 peers.
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This indicates that the company has a favorable balance between debt and equity, with a lower debt-to-equity ratio of 0.35, which can be perceived as a positive aspect 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 potential overvaluation. On the other hand, the high ROE suggests strong profitability relative to the industry average. However, the low EBITDA, gross profit, and revenue growth may raise concerns about the company's operational efficiency and growth prospects 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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