In the fast-paced and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Costco Wholesale COST in comparison to its major competitors within the Food & Staples Retailing industry. By analyzing crucial financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in 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 | 39.37 | 9.85 | 1.02 | 8.88% | $3.71 | $9.72 | 47.14% |
| Walmart Inc | 30.08 | 5.29 | 0.67 | 10.39% | $14.27 | $39.78 | 5.74% |
| Target Corp | 14.40 | 4.04 | 0.45 | 7.08% | $1.9 | $6.97 | -4.85% |
| Dollar Tree Inc | 19.16 | 2.57 | 0.80 | 2.24% | $0.49 | $2.14 | 8.23% |
| Dollar General Corp | 10.62 | 3.61 | 0.59 | 7.67% | $0.9 | $3.04 | 3.93% |
| BJ's Wholesale Club Holdings Inc | 18.33 | 7.43 | 0.48 | 11.12% | $0.26 | $0.9 | -2.75% |
| Sendas Distribuidora SA | 17.42 | 3.85 | 0.26 | 3.85% | $1.15 | $2.56 | 20.26% |
| Pricesmart Inc | 19.73 | 2.11 | 0.53 | 2.73% | $0.06 | $0.18 | 6.39% |
| Almacenes Exito SA | 298.97 | 0.50 | 0.15 | -0.1% | $306.87 | $1339.43 | 8.52% |
| Average | 53.59 | 3.67 | 0.49 | 5.62% | $40.74 | $174.38 | 5.68% |
After a detailed analysis of Costco Wholesale, the following trends become apparent:
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A Price to Earnings ratio of 39.37 significantly below the industry average by 0.73x suggests undervaluation. This can make the stock appealing for those seeking growth.
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It could be trading at a premium in relation to its book value, as indicated by its Price to Book ratio of 9.85 which exceeds the industry average by 2.68x.
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The stock's relatively high Price to Sales ratio of 1.02, surpassing the industry average by 2.08x, may indicate an aspect of overvaluation in terms of sales performance.
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The company has a higher Return on Equity (ROE) of 8.88%, which is 3.26% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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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.
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The company has lower gross profit of $9.72 Billion, which indicates 0.06x below the industry average. This potentially indicates lower revenue after accounting for production costs.
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The company's revenue growth of 47.14% exceeds the industry average of 5.68%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
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.
By considering the Debt-to-Equity ratio, Costco Wholesale can be compared to its top 4 peers, leading to the following observations:
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Costco Wholesale is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.35.
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This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.
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.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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