Inquiry Into Costco Wholesale's Competitor Dynamics In Consumer Staples Distribution & Retail Industry

Costco Wholesale Corporation -0.32% Pre

Costco Wholesale Corporation

COST

715.97

715.97

-0.32%

0.00% Pre

In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Costco Wholesale (NASDAQ:COST) and its primary competitors in the Consumer Staples Distribution & Retail industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within 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 45.20 11.25 1.20 6.21% $2.65 $7.34 6.18%
Walmart Inc 26.22 5.34 0.67 0.57% $4.58 $39.62 5.23%
Target Corp 18.16 5.26 0.62 7.93% $2.06 $7.25 -4.22%
Dollar Tree Inc 27 3.45 1.06 2.35% $0.52 $2.18 5.4%
Dollar General Corp 15.60 4.61 0.77 4.33% $0.65 $2.81 2.42%
BJ's Wholesale Club Holdings Inc 17.93 6.61 0.46 10.09% $0.26 $0.9 2.91%
Sendas Distribuidora SA 22.20 4.20 0.28 4.38% $1.36 $2.76 22.92%
Pricesmart Inc 21.81 2.10 0.53 1.38% $0.05 $0.19 9.48%
Average 21.27 4.51 0.63 4.43% $1.35 $7.96 6.31%

After a detailed analysis of Costco Wholesale, the following trends become apparent:

  • The current Price to Earnings ratio of 45.2 is 2.13x higher than the industry average, indicating the stock is priced at a premium level according to the market sentiment.

  • The elevated Price to Book ratio of 11.25 relative to the industry average by 2.49x suggests company might be overvalued based on its book value.

  • With a relatively high Price to Sales ratio of 1.2, which is 1.9x the industry average, the stock might be considered overvalued based on sales performance.

  • The Return on Equity (ROE) of 6.21% is 1.78% above the industry average, highlighting efficient use of equity to generate profits.

  • The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $2.65 Billion is 1.96x above the industry average, highlighting stronger profitability and robust cash flow generation.

  • The gross profit of $7.34 Billion is 0.92x below that of its industry, suggesting potential lower revenue after accounting for production costs.

  • With a revenue growth of 6.18%, which is much lower than the industry average of 6.31%, the company is experiencing a notable slowdown in sales expansion.

Debt To Equity Ratio

debt to equity

The debt-to-equity (D/E) ratio is an important measure to assess the financial structure and risk profile of a company.

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.

When examining Costco Wholesale in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:

  • Compared to its top 4 peers, Costco Wholesale has a stronger financial position indicated by its lower debt-to-equity ratio of 0.36.

  • This suggests that the company relies less on debt financing and has a more favorable balance between debt and equity, which can be seen as a positive attribute by investors.

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.

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