Case study · Nasdaq: COST
Costco
The steady compounder. A low-margin retailer that the market values like a premium growth company. Understanding why is a lesson in what investors pay for.
Fiscal 2026 = 52 weeks ended August 30, 2026. Source: Costco Q4 FY2026 earnings release (8-K, Sept 24, 2026).
Total revenue
$303.1B
FY26 · net sales +10.1%
Net income
$9.23B
FY26 · up from $8.10B
Diluted EPS
$20.76
FY26 · up from $18.21
P/E (approx.)
~46×
at ~$961, mid-Aug 2026
How Costco makes money
Costco sells goods at very small markups. Members pay an annual fee for the right to shop there. The fee is the real profit engine.
| FY2026 | FY2025 | |
|---|---|---|
| Net sales (merchandise) | $297.2B | $269.9B |
| Membership fees | $5.91B | $5.32B |
| Operating income | $11.69B | ~$10.4B |
| Net income | $9.23B | $8.10B |
| Warehouses at year-end | 939 | 914 |
The thing to notice
Membership fees ($5.9B) equal about half of operating income ($11.7B). Merchandise sales mainly cover costs. Costco is, in effect, a subscription business with warehouses attached.
What investors watch
- Comparable sales: Q4 FY26 comps rose 9.4% overall and 10.7% in the US. Costco reports sales monthly, so investors track this closely.
- Membership renewal rate: if renewals ever dropped meaningfully, the profit engine weakens.
- Warehouse openings: 939 now, with plans for 967 by the end of fiscal 2027. New warehouses are the main source of long-term growth.
- Digital sales: digitally enabled comps grew 19.5% in Q4.
- One-offs: Q4 EPS of $6.75 beat the $6.55 consensus, but included a $0.15 non-recurring benefit from tariff refunds.
Reading the valuation
At ~46× earnings, Costco is priced far above a typical retailer. Investors are paying for:
- Predictability: few companies grow sales and profit every year with so few surprises.
- Recurring revenue: fees renew automatically for most members.
- A long runway: steady new warehouses worldwide.
The risk is in the price itself. Earnings grew about 14% in FY26. If growth cooled to high single digits and the market decided Costco deserved "only" 35×, the stock could fall even while the business does fine. This is called multiple compression.
Try it
Open the DCF calculator with Costco loaded and see what growth rate is needed to justify today's price.
Sources
- Costco Q4 and FY2026 results, Exhibit 99.1 to Form 8-K (SEC)
- All Costco filings on EDGAR
- Share price reference: TIKR, Aug 17, 2026 ($961.10). Check a live quote before using.