A look at the company's most recent quarter, catalyst for growth and valuation.
Shares of Costco Wholesale Corp. are nearly flat since the
beginning of the year compared to a return of 12% for the S&P 500 Index.
Part of this can be explained in that Costco's stocked
gained more than 28% last year as consumers flocked to the company's stores to
stock upon everyday items during the worst of the Covid-19 pandemic.
The stock now looks pricey on a historical valuation basis
as well as its intrinsic value as determined by GuruFocus.
That being said, Costco, while not cheap, has a strong
business model and impressive same-store sales that make the stock deserving of
a high multiple.
A look at earnings results
Costco reported earnings results for the third quarter of
fiscal 2021 on May 27. Revenue grew 21.7% to $45.3 billion, the highest
year-over-year growth rate in at least five years and $971 million above what
Wall Street analysts had expected. Net income of $1.22 billion, or $2.75 per
share, compared very favorably to net income of $838 million, or $1.89 per
share, for the same period of the prior year. The most recent quarter includes
a 9 cent per share headwind from higher employee wages, but this won't be an
issue in future quarters as the higher wage program has ended. Earnings per
share was also 23 cents better than expected.
Year to date, revenue is up more than 15% while earnings per
share have increased 27.5%.
For the third quarter, same-store sales grew 20.6%, which is
higher than the growth rate so far for the fiscal year. Excluding the impact of
gas and currency exchange, comparable sales improved 15.1%, topping consensus
estimates of 12.7%.
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