Costco Wholesale (COST +2.33%) has been one of the most reliable stocks to own in the retail sector and beyond over its history.
The membership-based warehouse retailer has developed a winning business model based on selling high-quality bulk goods at bargain prices, and has established a reputation as a top retailer based on high customer satisfaction scores and strong renewal rates.
Over the last ten years, Costco stock has jumped 430%, easily outperforming the S&P 500, but over the last year, the stock has struggled as its lofty valuation seemed to drive a sell-off, despite solid results. Year-to-date through Dec. 23, the stock is down 7%, and it's fallen more than 20% since its peak early in the year.
That pullback could set up a buying opportunity for the stock. To determine whether that's true, let's take a look at where the stock might be in 3 years.
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Costco's current growth trajectory
While most brick-and-mortar retailers of Costco's size are pumping the brakes on new stores, Costco is expanding across the board. It's adding new stores domestically and abroad, and it's growing through same-store sales and e-commerce sales.
In the fiscal year ended in August 2025, Costco reported 7.6% comparable sales growth adjusted for foreign currency exchange and gasoline prices, and e-commerce sales jumped 16.1%. That performance drove net sales up 8.1% to $269.9 billion.
Total paid members, which make up another key revenue stream for Costco, rose 6.3% to 81 million in 2025, pushing membership fee income up 10.3% to $5.3 billion. That's important because Costco's membership fees essentially flow straight to the bottom line, and it runs its retail business nearly at cost. Costco opened 24 net new warehouses in fiscal 2025, bringing its total to 914, and plans to open another 30 net new stores in 2026.
What Costco could look like in 2028
Based on Costco's current trajectory, it's not too hard to extrapolate the figures to determine what the business might look like in three years.
If net sales grow by 8% over the next three years, they will reach $340 billion. If membership income grows at a similar 10% pace to what we saw last year, it would reach $7.1 billion, which is essentially profit, giving it $347.1 billion in revenue. Costco should have around 1,000 stores worldwide by then, and around 107.8 million members.
Estimating Costco's bottom-line profit is a little trickier, as there are more variables that come into play, but Costco's business is built on low margins since it attracts customers by keeping prices low. Over most of its history, its gross margin has tracked between 12% and 13%, and its operating margin has been between 3% and 4% for most of the last decade.
If Costco's 3.8% operating margin from last year holds steady and it has $347 billion in revenue, it would have $13.1 billion in operating income in fiscal 2028. Costco's interest income and expense could change significantly between now and then, depending on interest rates so we'll assume they will be flat at a net interest income of $435 million. If its tax rate holds steady at around 25%, the company would have $22.82 in earnings per share, assuming flat growth in shares outstanding, up 25% from where it is today.
That may be a conservative estimate as it doesn't assume any margin expansion, but it also seems fair based on the numbers we have. Costco could also pay another special dividend before then, as its last one came at the end of 2023.
NASDAQ: COST
Key Data Points
Is Costco a buy?
Based on the $22.82 EPS forecast in 2028, Costco trades at a price-to-earnings ratio of 37.5. Despite falling 20% from its peak this year, Costco still looks expensive, trading at a P/E of 46 based on trailing earnings.
I think being patient with the stock makes sense here, especially with some of the pressure on consumer discretionary spending. If the stock pulls back another 10%, that would be a more attractive price, considering its forecast over the next three years.
