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

Zacks Equity Research
·3 mins read

In the latest trading session, Costco (COST) closed at $381.54, marking a +1.32% move from the previous day. The stock outpaced the S&P 500's daily gain of 0.01%. At the same time, the Dow added 0.39%, and the tech-heavy Nasdaq lost 0.36%.

Heading into today, shares of the warehouse club operator had gained 11.13% over the past month, outpacing the Retail-Wholesale sector's gain of 5.61% and the S&P 500's gain of 2.55% in that time.

Wall Street will be looking for positivity from COST as it approaches its next earnings report date. The company is expected to report EPS of $1.95, up 12.72% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $41.34 billion, up 11.62% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $9.56 per share and revenue of $179.27 billion, which would represent changes of +8.02% and +7.5%, respectively, from the prior 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. 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. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

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. Within the past 30 days, our consensus EPS projection has moved 1.36% 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 39.38 right now. Its industry sports an average Forward P/E of 23.05, so we one might conclude that COST is trading at a premium comparatively.

Also, we should mention that COST has a PEG ratio of 4.7. 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. The Retail - Discount Stores was holding an average PEG ratio of 3.19 at yesterday's closing price.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 177, which puts it in the bottom 31% 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.

To follow COST in the coming trading sessions, be sure to utilize Zacks.com.


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Zacks Investment Research