Shares of membership-based wholesale retailer Costco Wholesale (COST +1.12%) are once again trading at levels near $1,000 after rising about 15% this year, crushing the S&P 500. Is the stock's strong outperformance a sign that shares are undervalued, or does its recent rise make the investment decision to buy even more difficult?
Ultimately, the investing question with Costco stock is not whether the company is executing. That's arguably its specialty -- consistently strong execution month in and month out. The bigger question for investors is whether the fundamentals are strong enough to justify the price investors are still paying for the stock.
And at today's valuation, I do not think they are.
Image source: Getty Images.
Sales trends remain solid
Costco's latest monthly update showed the business is still growing at an enviable pace. In the four-week retail month of January (ended Feb. 1, 2026), net sales rose 9.3% year over year to $21.3 billion. And for the first 22 weeks of the fiscal year, net sales increased 8.5% to $123.2 billion.
Looking at the retailer's comparable sales trends, or its sales trends at stores open for more than a year, the key metric shows that the company continues to find ways to get more out of its stores. Costco reported total company comparable sales of 7.1% in January. But when you strip out changes in gasoline prices and foreign exchange, total company comparable sales were 6.4% for the month.
Worth noting: Costco's digitally enabled comparable sales were especially strong in January, rising 34.4% as reported, or 33.1% when adjusted for gas and foreign exchange. This compares to 18.3% adjusted growth in digitally enabled sales during Costco's retail month of December.
Costco's fiscal first-quarter results (ended Nov. 23, 2025) tell a similar story: steady, high-quality growth.
Net sales during the period rose 8.2% year over year to $66.0 billion. And membership fees rose even faster, growing at a rate of 14% year over year. And the company's adjusted comparable sales for the quarter -- excluding gasoline and foreign exchange -- were 6.4% for total company comparable sales and 20.5% for digitally enabled comparable sales.
In short, the business is executing.
Costco continues to grow comparable sales in the mid-6% range, and its e-commerce growth is running much faster than its core warehouse base, showing that the company is well-positioned to succeed in a world where e-commerce continues to gain momentum. This is a good sign for investors worried about Amazon as a potential long-term threat to Costco.
NASDAQ: COST
Key Data Points
The problem is what the stock already assumes
Steady growth like this, derived from a business built on durability with a loyal customer base and a recurring, high-margin revenue stream from membership fees, demands a premium valuation from investors. But this doesn't mean investors should pay just any price to get into this growth story.
As of this writing, Costco trades at about 53 times earnings.
A multiple like this prices in exceptional growth without any slowdown -- years of mid-single-digit (or better) comparable store sales, continued membership fee growth, and meaningful profit margin expansion. Of course, this is exactly what Costco is delivering right now. But what if sales growth unexpectedly slows? Or what if competition from Amazon or Walmart's Sam's Club starts to chip away at Costco's growth prospects?
The problem isn't necessarily that Costco stock is grossly overvalued. It's not. But there's no room for error in its current valuation. Investors may want to demand at least some margin of safety when buying. For this reason, I think a price around $830 per share, or better, is probably a better entry point than $1,000.
