Critical Comparison: Costco Wholesale (COST) and Its Competitors

Costco Wholesale (NASDAQ: COST) is one of 12 public companies in the “Variety stores” industry, but how does it contrast to its peers? We will compare Costco Wholesale to similar companies based on the strength of its analyst recommendations, institutional ownership, valuation, risk, dividends, profitability and earnings.

Institutional & Insider Ownership

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72.9% of Costco Wholesale shares are owned by institutional investors. Comparatively, 76.5% of shares of all “Variety stores” companies are owned by institutional investors. 0.7% of Costco Wholesale shares are owned by insiders. Comparatively, 13.9% of shares of all “Variety stores” companies are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Costco Wholesale and its peers top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Net Income Price/Earnings Ratio
Costco Wholesale $129.03 billion $2.68 billion 31.61
Costco Wholesale Competitors $65.63 billion $1.74 billion 21.29

Costco Wholesale has higher revenue and earnings than its peers. Costco Wholesale is trading at a higher price-to-earnings ratio than its peers, indicating that it is currently more expensive than other companies in its industry.

Volatility & Risk

Costco Wholesale has a beta of 0.96, suggesting that its stock price is 4% less volatile than the S&P 500. Comparatively, Costco Wholesale’s peers have a beta of 0.89, suggesting that their average stock price is 11% less volatile than the S&P 500.

Profitability

This table compares Costco Wholesale and its peers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Costco Wholesale 2.18% 24.74% 7.37%
Costco Wholesale Competitors 3.76% 15.01% 6.64%

Dividends

Costco Wholesale pays an annual dividend of $2.00 per share and has a dividend yield of 1.1%. Costco Wholesale pays out 34.4% of its earnings in the form of a dividend. As a group, “Variety stores” companies pay a dividend yield of 1.6% and pay out 36.2% of their earnings in the form of a dividend. Costco Wholesale has raised its dividend for 14 consecutive years.

Analyst Recommendations

This is a breakdown of current recommendations for Costco Wholesale and its peers, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Costco Wholesale 0 7 19 0 2.73
Costco Wholesale Competitors 163 1262 1690 90 2.53

Costco Wholesale currently has a consensus target price of $190.86, indicating a potential upside of 3.75%. As a group, “Variety stores” companies have a potential upside of 6.76%. Given Costco Wholesale’s peers higher probable upside, analysts clearly believe Costco Wholesale has less favorable growth aspects than its peers.

Summary

Costco Wholesale beats its peers on 9 of the 15 factors compared.

Costco Wholesale Company Profile

Costco Wholesale Corporation is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, Spain, and through its subsidiaries in Taiwan and Korea. As of August 28, 2016, the Company operated 715 warehouses across the world. The Company’s average warehouse space is approximately 144,000 square feet. The Company’s warehouses on average operate on a seven-day, 70-hour week. The Company offers merchandise in various categories, which include foods (including dry foods, packaged foods and groceries); sundries (including snack foods, candy, alcoholic and nonalcoholic beverages, and cleaning supplies); hardlines (including appliances, electronics, health and beauty aids, hardware, and garden and patio); fresh foods (including meat, produce, deli and bakery); softlines (including apparel and small appliances), and other (including gas stations and pharmacy).

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