In today's fast-paced and highly competitive business world, it is crucial for investors and industry followers to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Costco Wholesale COST in relation to its major competitors in the Consumer Staples Distribution & Retail industry. By closely examining key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and highlight 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 nearly 600 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 | 45.92 | 11.43 | 1.22 | 6.21% | $2.65 | $7.34 | 6.18% |
| Walmart Inc | 26.81 | 5.46 | 0.68 | 0.57% | $4.58 | $39.62 | 5.23% |
| Target Corp | 18.09 | 5.24 | 0.61 | 7.93% | $2.06 | $7.25 | -4.22% |
| Dollar Tree Inc | 25.65 | 3.27 | 1.01 | 2.35% | $0.52 | $2.18 | 5.4% |
| Dollar General Corp | 15.40 | 4.55 | 0.76 | 4.33% | $0.65 | $2.81 | 2.42% |
| BJ's Wholesale Club Holdings Inc | 17.45 | 6.43 | 0.45 | 10.09% | $0.26 | $0.9 | 2.91% |
| Sendas Distribuidora SA | 23.01 | 4.35 | 0.29 | 4.38% | $1.36 | $2.76 | 22.92% |
| Pricesmart Inc | 20.43 | 2.13 | 0.51 | 3.42% | $0.08 | $0.2 | 10.59% |
| Average | 20.98 | 4.49 | 0.62 | 4.72% | $1.36 | $7.96 | 6.46% |
By conducting a comprehensive analysis of Costco Wholesale, the following trends become evident:
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At 45.92, the stock's Price to Earnings ratio significantly exceeds the industry average by 2.19x, suggesting a premium valuation relative to industry peers.
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The elevated Price to Book ratio of 11.43 relative to the industry average by 2.55x suggests company might be overvalued based on its book value.
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With a relatively high Price to Sales ratio of 1.22, which is 1.97x the industry average, the stock might be considered overvalued based on sales performance.
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The company has a higher Return on Equity (ROE) of 6.21%, which is 1.49% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $2.65 Billion, which is 1.95x above the industry average, implying stronger profitability and robust cash flow generation.
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With lower gross profit of $7.34 Billion, which indicates 0.92x below the industry average, the company may experience lower revenue after accounting for production costs.
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The company's revenue growth of 6.18% is significantly lower compared to the industry average of 6.46%. This indicates a potential fall in the company's sales performance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio gauges the extent to which a company has financed its operations through debt relative to equity.
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 analyzing Costco Wholesale in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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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 0.36.
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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 high PE ratio, indicating that its stock price is relatively high compared to its earnings. The high PB ratio suggests that the market values the company's assets at a premium. The high PS ratio indicates that investors are willing to pay a higher price for each dollar of the company's sales. On the other hand, Costco Wholesale's high ROE and EBITDA suggest strong profitability and operational efficiency. The low gross profit and revenue growth, however, indicate potential challenges in generating higher profits and expanding sales.
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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