Costco Wholesale (COST 3.11%) stock jumped 3% through 10:30 a.m. ET Friday after the company beat analyst forecasts for fiscal third quarter 2025 sales and earnings.
Heading into last night's report, analysts forecast Costco would earn $4.23 per share on $63.1 billion in quarterly sales. In fact, Costco earned $4.28 per share, and sales were $63.2 billion.
Image source: Getty Images.
Costco Q3 earnings
Costco's sales grew 8% to $62 billion. With $1.2 billion in membership fees added in, total revenue was $63.2 billion -- also up 8%. Selling, general, and administrative expenses outran sales growth, rising more than 10%, which isn't great. But surprisingly, despite all the tariffs turmoil of the last few months, merchandise costs rose less than 7.5%, allowing Costco to grow its operating income nicely -- up 14%.
On the bottom line, Costco's $4.28 in per-share profit increased 13%.
Free cash flow (FCF) grew nicely as well, and is now up 13% to $5.9 billion for the fiscal year to date, eclipsing reported earnings of $5.5 billion over the last nine months.
Is Costco stock a buy?
Tallying up the latest numbers, financial data provider S&P Global Market Intelligence tells me this is an improvement. Over the past 12 months, Costco's FCF was only $6.9 billion, so less than reported net income of $7.6 billion. Relative to the stock's $459.2 billion market cap, this means Costco stock costs 66.6 times trailing FCF, but only 60.4 times trailing earnings.
Is that too expensive to buy, considering the stock is only growing profits and free cash flow in the mid-teens? In my humble opinion, it is too expensive, which is why I don't own Costco stock.
It's also why I'm not benefiting from Costco stock going up 3% today.
