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Costco (COST) Gains But Lags Market: What You Should Know

Zacks Equity Research
·3 min read

Costco (COST) closed at $379.79 in the latest trading session, marking a +0.25% move from the prior day. This move lagged the S&P 500's daily gain of 1.17%. Meanwhile, the Dow gained 1.6%, and the Nasdaq, a tech-heavy index, added 0.8%.

Coming into today, shares of the warehouse club operator had gained 0.6% in the past month. In that same time, the Retail-Wholesale sector lost 4%, while the S&P 500 gained 2.26%.

COST will be looking to display strength as it nears its next earnings release, which is expected to be December 10, 2020. In that report, analysts expect COST to post earnings of $2 per share. This would mark year-over-year growth of 15.61%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $42.17 billion, up 13.85% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $9.69 per share and revenue of $182.39 billion. These totals would mark changes of +9.49% and +9.37%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for COST. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 1.02% higher. COST is currently sporting a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that COST has a Forward P/E ratio of 39.1 right now. For comparison, its industry has an average Forward P/E of 22.37, which means COST is trading at a premium to the group.

Investors should also note that COST has a PEG ratio of 4.6 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. COST's industry had an average PEG ratio of 3.1 as of yesterday's close.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 130, which puts it in the bottom 49% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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Zacks Investment Research