Shares of warehouse retailer Costco Wholesale (COST -0.00%) rose 50.7% last year, according to data from S&P Global Market Intelligence. This wasn't a dramatic series of sudden surges but a subtle, general uptrend that just didn't want to stop. Costco is the kind of stock you can just buy, stick under your pillow, and never lose a minute of sleep over. If you didn't already know, 2021 served as a perfect illustration of Costco's worry-free stability.
No, really. Costco's largest single-day pop last year was a 6.6% boost on Dec. 10 on the heels of an impressive first-quarter report. The retailer posted earnings of $2.98 per share on $50.4 billion in top-line sales, exceeding Wall Street's consensus estimates by 13% and 17%, respectively. Many stocks would have scored a double-digit price increase on a report like that, but Costco proved its consistent stability with a smaller gain.
That was arguably not even the strongest earnings surprise of the year. A bottom-line result 17% above the analyst consensus on a 4% revenue outperformance for the third quarter of fiscal 2021 gave Costco's stock a 2.4% haircut the next day. At the same time, analysts reacted to the same news with a flurry of boosted price targets. The market just doesn't make sense sometimes.
The larger point here is that Costco is firing on all cylinders, generating a gentle but powerful hum and enough torque to drive share prices dramatically higher in a long, slow climb.
That's a fitting market reaction, considering Costco's stubborn reliance on high merchandise-sales volumes at a razor-thin profit margin. Membership fees accounted for 77% of Costco's net income in fiscal year 2021. The membership program drives customer loyalty and engagement, while the annual fees generate reliable cash profits. Without the subscription element, Costco wouldn't be able to combine barely profitable merchandise prices with generous wages and benefits for its 300,000 employees.
A long, steady climb is simply true to form for this ultra-reliable company. Costco strikes me as a fantastic long-term investment with plenty of wealth-building muscle and relatively few surprises along the way. This stock has more than doubled the S&P 500 (^GSPC 1.45%) index returns over the last decade:
Past performance is no guarantee of future results, of course. However, Costco's long history of managing a successful business and providing robust shareholder returns add up to an above-average potential for market-beating results in 2022 and beyond, too.