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

Zacks Equity Research

Costco (COST) closed at $309.47 in the latest trading session, marking a -0.04% move from the prior day. This change lagged the S&P 500's 0.31% gain on the day. Meanwhile, the Dow gained 0.44%, and the Nasdaq, a tech-heavy index, added 0.26%.

Prior to today's trading, shares of the warehouse club operator had gained 5.33% over the past month. This has outpaced the Retail-Wholesale sector's loss of 0.66% and the S&P 500's gain of 1.18% in that time.

Wall Street will be looking for positivity from COST as it approaches its next earnings report date. This is expected to be March 5, 2020. The company is expected to report EPS of $2.06, up 2.49% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $38.34 billion, up 8.31% from the year-ago period.

COST's full-year Zacks Consensus Estimates are calling for earnings of $8.61 per share and revenue of $162.96 billion. These results would represent year-over-year changes of +5.13% and +6.72%, respectively.

It is also important to note the recent changes to analyst estimates for COST. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for 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 ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.28% higher within the past month. COST is holding a Zacks Rank of #2 (Buy) right now.

In terms of valuation, COST is currently trading at a Forward P/E ratio of 35.97. This valuation marks a premium compared to its industry's average Forward P/E of 23.31.

Meanwhile, COST's PEG ratio is currently 4.44. 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 2.12 as of yesterday's close.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 38, putting it in the top 15% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. 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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