Costco Wholesale (COST +1.27%) lost value over the last 12 months, so it might surprise investors to see that the stock has risen 15% since the beginning of the year.
The increase is likely not news-driven. Retail stocks such as Walmart and Target have risen in similar proportions, and the company's earnings for the second quarter of fiscal 2026 do not come out until March 5.
Does this increase mean investors should buy Costco stock? Let's take a closer look.
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What drives Costco's stock
Costco has long been a popular choice for customers and investors alike. It maintains a membership renewal rate of around 92%, an indicator of its consistently loyal following.
On the investor side, it was a longtime holding in Berkshire Hathaway's when Warren Buffett oversaw its investments, and Buffett partner Charlie Munger sat on Costco's board until his passing in 2023.
NASDAQ: COST
Key Data Points
Moreover, even though Costco does not grow rapidly, its revenue rose by 6% in the first quarter of fiscal 2026 (ended Nov. 23, 2025), and its $2.0 billion in net income for that quarter surged 11% higher. That was close to its fiscal 2025 results, when revenue increased by 8%, and its $8.1 billion profit was 10% above year-ago levels.
Additionally, Costco's warehouses have succeeded in one key area where most competitors have failed -- international expansion. Costco's approach has resonated both in Europe and Asia, markets where Walmart had little success with brick-and-mortar stores. That has given Costco a much larger addressable market.
The problem with Costco is its success itself, and it may be too late to buy. Amid the recent rise in the stock price, its P/E ratio is now 52, a level far surpassing Walmart, Target, and even Amazon. Unfortunately, with profits rising in the low double-digits, its growth likely does not justify its valuation.
COST PE Ratio data by YCharts
Furthermore, Berkshire Hathaway closed its Costco position in 2020, in part for this reason. Although Buffett later said that it was "probably a mistake," the valuation has risen since that time, making it more of a concern.
Stand pat on Costco stock
Although long-term investors have good reason to hold Costco stock, investors should not add shares at this time. Indeed, Costco is a high-quality company, and its ability to continue growing its revenue and profits is unlikely to change.
Unfortunately, Costco's success is well known to investors and priced too much into the stock given its valuation. Until its earnings multiple is closer to that of its peers, this stock is probably not a buy.
