In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Costco Wholesale COST and its primary competitors in the Consumer Staples Distribution & Retail industry. By closely examining key financial metrics, market position, and growth prospects, our aim is 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 | 53.75 | 16.70 | 1.56 | 10.37% | $3.87 | $10.11 | 0.96% |
| Walmart Inc | 43.58 | 7.97 | 1.02 | 5.43% | $10.1 | $42.52 | 4.77% |
| Target Corp | 15.60 | 4.82 | 0.65 | 8.43% | $2.4 | $7.65 | 2.74% |
| Dollar General Corp | 12.69 | 2.47 | 0.45 | 5.25% | $0.79 | $3.06 | 4.23% |
| BJ's Wholesale Club Holdings Inc | 22.24 | 7.06 | 0.58 | 9.11% | $0.27 | $0.96 | 4.87% |
| Pricesmart Inc | 19.09 | 2.38 | 0.53 | 2.56% | $0.07 | $0.21 | 9.65% |
| Sendas Distribuidora SA | 15.98 | 2.20 | 0.15 | 2.58% | $1.34 | $2.95 | 11.81% |
| Almacenes Exito SA | 98.41 | 0.46 | 0.14 | -0.29% | $303.29 | $1299.7 | -0.86% |
| Average | 32.51 | 3.91 | 0.5 | 4.72% | $45.47 | $193.86 | 5.32% |
By closely studying Costco Wholesale, we can observe the following trends:
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Notably, the current Price to Earnings ratio for this stock, 53.75, is 1.65x above the industry norm, reflecting a higher valuation relative to the industry.
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With a Price to Book ratio of 16.7, which is 4.27x the industry average, Costco Wholesale might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.
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With a relatively high Price to Sales ratio of 1.56, which is 3.12x the industry average, the stock might be considered overvalued based on sales performance.
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The company has a higher Return on Equity (ROE) of 10.37%, which is 5.65% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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Compared to its industry, the company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $3.87 Billion, which is 0.09x below the industry average, potentially indicating lower profitability or financial challenges.
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The company has lower gross profit of $10.11 Billion, which indicates 0.05x below the industry average. This potentially indicates 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 5.32%. This suggests a potential struggle in generating increased sales volume.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio provides insights into the proportion of debt a company has in relation to its equity and asset value.
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 comparing Costco Wholesale with its top 4 peers based on the Debt-to-Equity ratio, the following insights can be observed:
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Among its top 4 peers, Costco Wholesale has a stronger financial position with a lower debt-to-equity ratio of 0.35.
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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 suggests strong profitability relative to its equity, while the low EBITDA, gross profit, and revenue growth numbers may raise concerns about the company's operational efficiency and growth potential within the industry sector.
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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