Costco (COST +0.51%) is the go-to place for everyday consumers looking to save money on a wide range of products and services, but does that make its stock a long-term buy for everyday investors?
Although the stock has rallied by more than 150% over the past five years, it's only up by 5% over the past year. Those recent gains include a 13% year-to-date rally, so it's hard to make a decision just by looking at Costco's stock chart. Naturally, you have to look at a stock's fundamentals before making a buy, and these are some of the key things you will discover upon taking a closer look.
Comparable sales continue to grow across the board
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Comparable sales growth is an important metric for any retailer. Growth in this area indicates customers are returning to a company's stores and buying more products. Negative growth rates mean people aren't returning as often and making smaller purchases. While 1% comparable sales growth is better than negative growth, that low growth rate may be more due to inflation than to people visiting the store more often.
NASDAQ: COST
Key Data Points
Costco delivered 6.4% year-over-year comparable sales growth in the first quarter of fiscal year 2026, with international markets showing the most growth. The company's e-commerce efforts have been paying off as well, based on a 20.5% year-over-year uptick in digitally enabled comparable sales.
Costco is one of the few companies to post monthly updates, and its December 2025 sales results show 6.2% year-over-year comparable sales growth. These numbers, plus Costco's long history of success, imply the company should continue to grow in 2026.
The opportunity cost of buying Costco stock
Costco's revenue and net income are both trending in the right direction, but as a retailer, it is known for low profit margins. Costco wrapped up the quarter with a 3% net profit margin. Furthermore, Costco's P/E ratio is above 50, which may be a bit high for a wholesaler. Net income growth only came in at 11.3% year over year, so the valuation doesn't leave much room for mistakes.
It's also important to consider your long-term financial goals and risk tolerance. Costco may be a good pick for older investors who want less risk and a reliable company. However, most of the riches in financial markets have come from AI stocks in recent years. The AI industry offers opportunities that could crush Costco's stock returns, but it also carries greater risk.
Costco isn't the type of stock that can stage a prolonged rally. It has a rich valuation and achieves moderate growth rates. Some AI companies are more than doubling their revenue year over year, while that scenario isn't possible for Costco.
It's not like Costco will go out of business. It's an essential wholesaler that many people use. However, wide adoption doesn't guarantee excellent long-term returns. Conservative investors may like the stock, but growth investors should look elsewhere.
