27% profits every 20 days?
This is what Nic Chahine averages with his options buys. Not selling covered calls or spreads... BUYING options. Most traders don't even have a winning percentage of 27% buying options. He has an 83% win rate. Here's how he does it.
In the ever-evolving and intensely competitive business landscape, conducting a thorough company analysis is of utmost importance for investors and industry followers. In this article, we will carry out an in-depth industry comparison, assessing Costco Wholesale (NASDAQ:COST) alongside its primary competitors in the Food & Staples Retailing industry. By meticulously examining key financial metrics, market positioning, and growth prospects, we aim to offer valuable insights to investors and shed light on company's performance within the industry.
Costco Wholesale Background
Costco operates a membership-based, no-frills retail model, predicated on offering a select product assortment in bulk quantities at bargain prices. The firm avoids maintaining costly product displays by keeping inventory on pallets and limits distribution expenses by storing its inventory at point of sale in the warehouse. Given Costco's frugal cost structure, the firm is able to price its merchandise below competing retailers, driving high sales volume per warehouse and allowing the retailer to generate strong profits on thin margins. Costco operates 591 warehouses in the United States and boasts over 60% market share in the domestic warehouse club industry. Internationally, Costco operates another 270 warehouses, primarily in markets such as Canada, Mexico, Japan, and the U.K.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Costco Wholesale Corp | 38.65 | 9.67 | 1 | 8.88% | $3.71 | $9.72 | 9.5% |
| Walmart Inc | 31.11 | 5.47 | 0.69 | 10.39% | $14.27 | $39.78 | 5.74% |
| Target Corp | 15.21 | 4.27 | 0.47 | 7.08% | $1.9 | $6.97 | -4.85% |
| Dollar General Corp | 12.39 | 4.21 | 0.69 | 7.67% | $0.9 | $3.04 | 3.93% |
| Dollar Tree Inc | 19.79 | 2.65 | 0.82 | 2.24% | $0.49 | $2.14 | 8.23% |
| BJ's Wholesale Club Holdings Inc | 18.89 | 7.65 | 0.49 | 11.12% | $0.26 | $0.9 | -2.75% |
| Sendas Distribuidora SA | 17.29 | 3.82 | 0.26 | 3.85% | $1.15 | $2.56 | 20.26% |
| Pricesmart Inc | 19.31 | 2.07 | 0.52 | 2.73% | $0.06 | $0.18 | 6.39% |
| Almacenes Exito SA | 432.38 | 0.72 | 0.22 | -0.1% | $306.87 | $1339.43 | 8.52% |
| Average | 70.8 | 3.86 | 0.52 | 5.62% | $40.74 | $174.38 | 5.68% |
By conducting an in-depth analysis of Costco Wholesale, we can identify the following trends:
The Price to Earnings ratio of 38.65 is 0.55x lower than the industry average, indicating potential undervaluation for the stock.
The elevated Price to Book ratio of 9.67 relative to the industry average by 2.51x suggests company might be overvalued based on its book value.
With a relatively high Price to Sales ratio of 1.0, which is 1.92x the industry average, the stock might be considered overvalued based on sales performance.
The Return on Equity (ROE) of 8.88% is 3.26% above the industry average, highlighting efficient use of equity to generate profits.
With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $3.71 Billion, which is 0.09x below the industry average, the company may face lower profitability or financial challenges.
Compared to its industry, the company has lower gross profit of $9.72 Billion, which indicates 0.06x below the industry average, potentially indicating lower revenue after accounting for production costs.
The company is experiencing remarkable revenue growth, with a rate of 9.5%, outperforming the industry average of 5.68%.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage of a company.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
When examining Costco Wholesale in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:
Costco Wholesale has a stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.35.
This suggests that the company has a more favorable balance between debt and equity, which can be perceived as a positive indicator by investors.
Key Takeaways
Costco Wholesale has a low PE ratio compared to its peers in the Food & Staples Retailing industry, indicating that it may be undervalued. The company also has a high PB ratio, suggesting that investors are willing to pay a premium for its book value. Additionally, Costco has a high PS ratio, indicating that investors are willing to pay a higher price for its sales. In terms of profitability, Costco has a high ROE, indicating efficient use of shareholders' funds. However, its EBITDA and gross profit are low, suggesting potential challenges in generating operating profits. Lastly, Costco has a high revenue growth rate, indicating strong performance in terms of sales expansion.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
27% profits every 20 days?
This is what Nic Chahine averages with his options buys. Not selling covered calls or spreads... BUYING options. Most traders don't even have a winning percentage of 27% buying options. He has an 83% win rate. Here's how he does it.
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