There are many public companies from which an investor can choose. That makes it challenging to pick the right ones.
However, sometimes a company stands out as an exciting long-term investment opportunity. And it's not always the hottest technology stock whose price has skyrocketed.
Costco Wholesale (COST +1.10%) continues to perform well operationally and has handsomely rewarded shareholders over the years. Over the last five years (through Jan. 16), the shares returned 166.1%, compared to 98.2% for the S&P 500 index.
NASDAQ: COST
Key Data Points
However, investors shouldn't feel they've missed the boat. Here are three reasons Costco remains an excellent buying opportunity.
Image source: Getty Images.
1. Low prices, high quality
Costco appeals to shoppers due to its low unit prices on a wide range of goods and services. Offering a limited number of brands, often in bulk, the warehouse operator provides high-quality goods.
Yet Costco offers every imaginable product and service. These include food, appliances, tires, toys, prescription and non-prescription drugs, jewelry, furniture, gas, and flooring, to name just a few.
Attractive unit prices for high-quality merchandise (and a generous return policy) have proven a powerful combination. It provides Costco with a major competitive advantage over other retailers.
Clearly, it has become a popular shopping destination, consistently producing positive same-store sales (comps). Fiscal first-quarter comps increased 6.4% after excluding foreign-currency translation effects and the impact of changing gas prices. The period ended on Nov. 23.
2. Membership fees
One reason that Costco can offer such attractive prices is that it charges people an annual fee to shop at its warehouses. This has attracted a loyal following.
Individuals can choose between Gold Star ($65 annual fee) and Executive ($130, but 2% cash back) memberships. Costco raised these fees starting in September 2024 for the first time in seven years.
People didn't seem to mind the higher fee. Apparently, they still find value in paying for a Costco membership. Renewal rates continue to hover at around 90%, and its paid membership grew from 2024's 76.2 million to 81 million at the end of 2025. They increased to 81.4 million at the end of the first quarter.
Merchandise sales and membership fees produce a very profitable business. Costco's operating income grew 12.2% year over year to about $2.5 billion.
3. Growth runway
Costco opened its first warehouse, under the Price Club banner, 60 years ago. However, it's far from a mature, slow-growth company.
The company continues to have expansion opportunities. It consistently opens 20 to 30 new locations annually. It had 923 warehouses at the end of the first quarter, including 633 in the U.S., compared to 914 at the end of the year.
It's still opening warehouses in the U.S., and there appears to be more room for growth. Costco also has plenty of growth opportunities internationally. It has warehouses in Canada and Mexico, and a handful of locations in places like China, Spain, France, and Sweden.
It's unsurprising that Costco's simple, yet effective, business translates well in international locations. After all, who isn't attracted to low-price, high-quality goods?
Costco's shares certainly trade like a growth stock. The stock has a high price-to-earnings (P/E) ratio of 52. That's much higher than the S&P 500 index's 31 P/E multiple.
However, that valuation doesn't concern me. After all, as legendary investor Warren Buffett has said, "It's better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Costco certainly qualifies as a wonderful company. It continues to execute its strategy well, drawing paid members. It's able to repeat this formula and grow the number of warehouses, which should continue to fuel strong and consistent sales and profit growth.
