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Costco (COST) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

Costco (COST) closed at $299.84 in the latest trading session, marking a +1.35% move from the prior day. This change outpaced the S&P 500's 0.33% gain on the day. Elsewhere, the Dow gained 0.43%, while the tech-heavy Nasdaq added 0.33%.

Heading into today, shares of the warehouse club operator had gained 4.2% over the past month, outpacing the Retail-Wholesale sector's gain of 2.33% and the S&P 500's gain of 2.66% in that time.

Investors will be hoping for strength from COST as it approaches its next earnings release. In that report, analysts expect COST to post earnings of $1.71 per share. This would mark year-over-year growth of 6.21%. Meanwhile, our latest consensus estimate is calling for revenue of $37.36 billion, up 6.54% from the prior-year quarter.

COST's full-year Zacks Consensus Estimates are calling for earnings of $8.60 per share and revenue of $162.81 billion. These results would represent year-over-year changes of +5.01% and +6.62%, respectively.

Any recent changes to analyst estimates for COST should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

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.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 1.07% higher within the past month. COST currently has a Zacks Rank of #2 (Buy).

Digging into valuation, COST currently has a Forward P/E ratio of 34.39. This valuation marks a premium compared to its industry's average Forward P/E of 23.25.

It is also worth noting that COST currently has a PEG ratio of 4.05. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Retail - Discount Stores stocks are, on average, holding a PEG ratio of 2.34 based on yesterday's closing prices.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 55, putting it in the top 22% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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