Costco Wholesale (NASDAQ: COST) has delivered strong returns for long-term investors. Over the past five years, Costco stock has gained 110%, outperforming the S&P 500’s 73% return. However, the shares have been roughly flat over the past year, while the index has risen 19%. Valuation has been a key factor behind that underperformance.
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Costco’s business remains strong
Costco’s underlying business continues to perform well. Third-quarter sales increased 11.6% year over year, while comparable-store sales rose 6.6% after excluding the effects of gasoline prices and currency fluctuations in international markets.
The warehouse retailer is also growing across several important areas. E-commerce sales climbed 21% year over year, Costco set new records for fuel volume, and it increased member value by lowering prices on staples such as eggs and beef.
Costco stock valuation remains elevated
Valuation is the main issue weighing on Costco stock. The shares traded at a price-to-earnings multiple of about 60 roughly a year ago. Although that premium has since narrowed, Costco still trades at approximately 47 times trailing earnings, above its 10-year average of around 40.
At its current price, Costco is not an obvious buy. Investors may be better served by waiting for the stock to move closer to its historical valuation, or potentially below it. Buying now carries the risk of owning an excellent business while its valuation is reduced further and the shares continue to lag the broader market.
Should you buy Costco stock now?
Costco remains a high-quality business with strong sales growth, resilient membership economics, and expanding digital operations. However, its elevated earnings multiple limits the margin of safety for new investors. A more attractive entry point could emerge if the stock’s valuation moves closer to its long-term average.
The Motley Fool Stock Advisor analyst team has identified what it believes are the 10 best stocks for investors to buy now, and Costco Wholesale was not included among them. The selected companies are positioned for long-term growth and could deliver significant returns in the coming years.
Stock Advisor cites past recommendations including Netflix on December 17, 2004, when a $1,000 investment would have grown to $440,710, and Nvidia on April 15, 2005, when the same investment would have grown to $1,335,252.
Stock Advisor returns as of August 31, 2026.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
