Costco stock analysis. COST stock. April 2023
Visit our Substack for more: [ Ссылка ]
Legendary investor Charlie Munger has shared that he’s addicted to Costco. His friend, Warren Buffett, had a position in the company until the end of 2020. And it’s been one of the best performing stocks of the last 30 years.
Today the company is worth 217 billion dollars so what makes Costco such a good business?
For one, it takes care of its stakeholders.
Employees are fairly compensated, and even though Costco is the 3rd biggest retailer behind Walmart and Amazon, they provide superior experience through a commitment to affordable prices.
A great example is the Costco hot dog. Despite rampant inflation, a Costco hot dog and soda costs the same as it did back in 1985 at just $1.50.
Another example is Costco’s rotiserrie chickens which sell for only 4.99.
These products are known as loss leaders. They lose Costco money individually, but the low prices get customers in the door and also drive memberships.
And Costco owns its own poultry farms in order to keep its prices low.
Costco’s financial performance has been remarkably consistent. Their revenue has more than doubled from $113 billion back in 2014 to $234 billion over the last twelve months.
Analysts are projecting growth of around 6-7% for the next 3 years, which is still impressive considering the size of the business.
As mentioned, memberships have proven to be incredibly good for Costco’s business, not only attracting new customers but also ensuring they continue to shop in their stores.
But, due to the nature of the business, their operating margin is fairly low at around 3%. This translates to around $8 billion in operating profit for the last twelve months and 6.1 billion in net income.
#stocks #investing #stockmarket #stockstobuy
