Meet the Monster Stock that Continues to Crush the Market

Market-crushing stocks come in a few different forms. They're not always the young tech stocks that often dominate the conversation. You can find great value stocks and dividend stocks that beat the market, and they're also lower-risk and might come with passive income.

Costco Wholesale (COST 0.42%) is a monster stock that continues to crush the market, and it has done so over almost any time period you would look at. Let's see why, and whether or not that can continue.

Image source: Getty Images.

When things are tough, customers choose Costco

Costco operates 905 stores globally and 624 stores in the U.S. alone. It's known for its razor-thin margins that result in some of the lowest prices you can find anywhere, which is why it succeeds even when there's economic pressure.

Here's a snapshot of how it's been doing over the past year. Costco's fiscal year starts Sept. 2.

Data source: Costco quarterly reports. All growth is year over year.

Management said that due to its limited product line, global footprint, and scale, it has been able to keep prices low despite the pressured macroeconomy, and it even lowered prices on some items like eggs and butter. Its popular owned brand, Kirkland Signature, is cheaper to produce and has been outpacing overall sales. Average ticket was up only 0.4% year over year in the quarter, but shopping frequency was up 5.2%.

This specifically helped Costco skirt the raised tariffs in the company's fiscal 2025 third quarter (ended May 11). Because it's a global company with a robust supply chain, Costco was able to reroute some of its products to different locations and avoid higher tariffs. The market loves Costco's resilience and stability, and this is one way you can see it clearly in action.

And also any other time

Outside of the usual metrics that give the financial picture, Costco provides membership figures that tell a deeper story. Membership fee income increased 10.4% year over year in the third quarter, and 4.6% of the fee income came from the $5 fee hike that started in September. U.S. and Canada renewal rates were 92.7%, with global rates at 90.2%, and household members increased 6.6% from last year.

One area where Costco has been extremely successful recently is e-commerce. E-commerce sales increased 14.8% year over year in the third quarter. Management has been investing in technology and digital channels to meet consumer demand. It's carving out its own niche and competing where it makes sense. For example, it doesn't make sense for it to deliver small items or even prepare them for pickup, but delivering large, expensive items through its own logistics system is profitable, and items delivered increased 31% year over year in the quarter.

Costco's store count is quite low compared with other grocery and discount chains like Walmart, which has 4,600 U.S. locations, and Target, which is close to hitting 2,000, for example. Costco opened nine new stores in the third quarter, and it's planning to open about 30 annually. That gives it plenty of long-term growth, both in the U.S. and worldwide.

How high can Costco stock go?

Costco stock is up 15% this year vs. 2% for the S&P 500. It continues to rise despite sporting a premium P/E ratio of nearly 60. That's near its all-time high, and well above its 10-year average. However, it continues to climb.

COST PE Ratio data by YCharts

The market sees tremendous value in owning Costco stock, which is why it gives it such a premium. Every time I've said to be cautious about Costco stock because of its valuation, it just continues to go higher.

Where does that leave investors today? I would say that if you have a long time horizon, you could take a position in Costco stock even at this price. I wouldn't make it your biggest position, but Costco stock is reliable for market-beating gains over the long term. Plus, it pays a dividend, making it even more attractive.