Now that Costco Wholesale (COST 1.01%) is offering certain primary care services to its members, CVS Health and Walgreens Boots Alliance have a new competitor on the block. While its entry into yet another healthcare domain is unlikely to lead to a windfall overnight, it's undeniable that Costco's gargantuan scale and proven history of profitably catering to the whims of its customers imply good odds of its success in the long term.

But how does that factor into the decision about whether to buy its stock today or not? If anything, it makes the bull thesis even stronger. Here's why. 

Four healthcare markets are now battlegrounds

Costco's entry into providing primary care checkups and telehealth means that it's now competing with CVS and Walgreens in a total of four different healthcare markets. Aside from basic primary care, which CVS delivers at its MinuteClinics and Walgreens at its VillageMD locations, the wholesaler fills prescriptions, resells health insurance coverage, and sells consumer health products like Advil in bulk to its members. Given that there are nearly 128 million Costco cardholders globally, it could in theory siphon a massive amount of business over time from the big healthcare incumbents. 

The catch is that it would need to do a tremendous amount of siphoning for the additional income to be noticeable for shareholders. For its 2023 fiscal year, Costco brought in $238 billion in revenue, and more than $6 billion in net income. The majority of its net income stems from its annual membership fees, which totaled a bit less than $5 billion, with its narrow-margin product and service sales contributing relatively little.

Even if an improbably high proportion of 10% of its members decided to get an in-person primary care visit each year -- for which the company is currently billing $72 -- it would only generate around $921 million in revenue, which is only 0.3% of its annual haul. Plus some of that sum would likely need to be paid to Sesame, the business it's partnering with for organizing the care visits. 

Still, more revenue is more revenue. Knowing Costco's management, there is no way that the company is offering these services at a loss. And in a space as large as consumer healthcare, it has plenty of room to grow its collection of offerings even more in the future. This could be just the start.

The case for an investment

Future possibilities for the primary care service aside, Costco was and is a great pick for most portfolios. Further growth in its healthcare segment would bolster that argument, but it's hardly necessary to justify a purchase. 

Nearly 93% of its members opt to renew their subscription each year, and the company's warehouses are often the cheapest place to buy staple household goods and groceries. As mentioned, memberships contribute most of its net income, so in combination with its high retention rate, its bottom line is fairly safe from erosion.

As it expands geographically by setting up new warehouses every quarter, it also has a clear pathway to keep adding to its top line as well as its membership base. Troublesome macroeconomic factors like inflation could easily drive more customers into its arms, as it's hard to do any better elsewhere.

The biggest issue with buying shares of Costco is that they're expensive. Its price-to-earnings (P/E) multiple is above 40. But given its propensity for adding to its sales and earnings each year, for those willing to hold its shares for the long term, the valuation today should not be disqualifying.