Costco Wholesale (COST 1.01%) has been a dependable market outperformer for years. Investors love its reliable growth and robust profitability, and it even pays a dividend. It performs well in good times, and sometimes even better in rough times.

Costco stock is up about 44% over the past year, or about double the S&P 500's rise. It has a market cap of $320 billion right now. Can it become a trillion-dollar stock by 2030?

Why does everyone love Costco?

Costco operates a fee-based membership model that breeds loyalty, high volume, and profits. Customers pay an annual fee that goes straight to the bottom line, and Costco marks up products with razor-thin margins to cover related costs. When shoppers are penny-pinching, they're more likely to shop there. Even so, sales have been pressured because customers are delaying large and expensive purchases. When they're not, they're spending on higher-priced items, leading to higher sales.

In the 2024 fiscal first quarter (ended Nov. 26, 2023), sales and comparable sales continued to accelerate, increasing 6.1% and 3.8% year over year respectively. The membership fee increased 8.2%, U.S. and Canada renewal rates were 92.8%, and global renewal rates were 90.5%. Cardholders increased by 7.1%.

These trends point to satisfied customers, and increasing membership indicates that Costco can expect to enjoy continued strong sales. Costco has 871 warehouses, with 600 in the U.S., and it's planning to open another 31 this year. It has plenty of expansion opportunities domestically and even more so globally, giving it a long growth runway. In other words, Costco has plenty of growth drivers to keep on delivering solid performance.

Will Costco join the trillion-dollar club?

This is more of a when, not if, question. There are only seven companies that currently sport a trillion-dollar market cap, and they're predominantly tech companies. But since the market is on the rise again, this number is likely to increase over the next few years.

For Costco to join the club, its stock needs to triple from $320 billion. Is that a possibility over the next seven years?

Costco stock is trading at a price-to-earnings ratio of 49, its highest in the past decade. To maintain this multiple at a market cap of $1 trillion, net income of $6.5 billion today would need to triple as well, or grow at a compound annual growth rate (CAGR) of about 17%.

In fiscal 2016, net income was $779 million, and it's grown at a CAGR of 35% over the past seven years. So this seems very doable.

If the price-to-earnings ratio changes, these numbers will change, too. Costco's average price-to-earnings ratio over the past 10 years is 34. A market cap of $1 trillion with that multiple implies net income of $29 billion. That implies a CAGR of 24%, which is still well within what seems possible.

Costco is an excellent stock to own with many growth drivers, and it's likely to become a trillion-dollar stock within the next few years.