Costco Wholesale Corp (Costs) DCF Value: Is the stock underrated?

On February 4, 2025By Littum

As part of a new series, we typically perform a DCF every week on one of the companies on our screens. This week we thought we would look at one of the stocks that are not currently on our screens, Costco Wholesale Corp (Cost).

Profile

Costco operates a member-based, non-frills retail model, which is based on offering a selected product range in bulk quantities at negotiation prices. The company avoids maintaining expensive product screens by storing fixtures on pallets and limiting distribution costs by storing its warehouse at the point of sale in the warehouse. Given Costco’s sparse cost structure, the company is able to price its goods below competing retailers, run high sales volume per year. Warehouse and allow the dealer to generate strong profits on thin margins. Costco operates over 600 warehouses in the US and boasts over 60% market share in the domestic warehouse club industry. Internationally, Costco operates an additional 280 stocks, primarily in markets such as Canada, Mexico, Japan and the UK.