In today's fast-paced and competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies before making investment decisions. In this article, we will conduct a comprehensive industry comparison, evaluating Costco Wholesale COST against its key competitors in the Consumer Staples Distribution & Retail industry. By examining key financial metrics, market position, and growth prospects, we aim to provide valuable insights for investors and shed light on company's performance within 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 boasts 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 | 51.30 | 16.85 | 1.45 | 7.9% | $2.84 | $7.34 | 0.12% |
| Walmart Inc | 28.54 | 6.60 | 0.82 | 6.18% | $10.88 | $40.08 | -6.85% |
| Target Corp | 16.88 | 5.03 | 0.65 | 6.91% | $2.04 | $7.08 | -3.12% |
| Dollar General Corp | 19.61 | 4.23 | 0.75 | 5.28% | $0.78 | $2.99 | 6.11% |
| BJ's Wholesale Club Holdings Inc | 22.42 | 7.52 | 0.58 | 7.44% | $0.22 | $0.88 | 4.14% |
| Sendas Distribuidora SA | 23.22 | 3.45 | 0.24 | 1.29% | $1.15 | $2.8 | 14.08% |
| Pricesmart Inc | 20.91 | 2.33 | 0.54 | 3.6% | $0.08 | $0.22 | 13.11% |
| Almacenes Exito SA | 66.27 | 0.45 | 0.14 | -0.61% | $245.5 | $1321.95 | -3.32% |
| Average | 28.26 | 4.23 | 0.53 | 4.3% | $37.24 | $196.57 | 3.45% |
Through an analysis of Costco Wholesale, we can infer the following trends:
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The current Price to Earnings ratio of 51.3 is 1.82x higher than the industry average, indicating the stock is priced at a premium level according to the market sentiment.
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The elevated Price to Book ratio of 16.85 relative to the industry average by 3.98x suggests company might be overvalued based on its book value.
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The stock's relatively high Price to Sales ratio of 1.45, surpassing the industry average by 2.74x, may indicate an aspect of overvaluation in terms of sales performance.
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The company has a higher Return on Equity (ROE) of 7.9%, which is 3.6% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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The company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $2.84 Billion, which is 0.08x below the industry average. This potentially indicates lower profitability or financial challenges.
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With lower gross profit of $7.34 Billion, which indicates 0.04x below the industry average, the company may experience lower revenue after accounting for production costs.
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The company is witnessing a substantial decline in revenue growth, with a rate of 0.12% compared to the industry average of 3.45%, which indicates a challenging sales environment.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage of a company.
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.
When assessing Costco Wholesale against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
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In terms of the debt-to-equity ratio, Costco Wholesale has a lower level of debt compared to its top 4 peers, indicating a stronger financial position.
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This implies that the company relies less on debt financing and has a more favorable balance between debt and equity with a lower debt-to-equity ratio of 0.43.
Key Takeaways
The high PE, PB, and PS ratios of Costco Wholesale suggest that the company is trading at a premium compared to its peers in the Consumer Staples Distribution & Retail industry. This indicates that investors may be willing to pay more for each unit of earnings, book value, and sales generated by Costco. On the other hand, the high ROE, low EBITDA, low gross profit, and low revenue growth of Costco Wholesale indicate that the company may be facing challenges in efficiently utilizing its assets and generating profits compared to its industry peers.
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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