If everything counts in large amounts, Costco (NASDAQ:COST) would rule supreme. But the warehouse club chain that has carved out a living by tacking on small markups to big groceries isn't exactly living large as it heads into tomorrow's fiscal first-quarter earnings report.

The stock has surrendered roughly 40% of its value after peaking three years ago, and back in October the company closed out fiscal 2003 with an earnings drop. The shares that proved to be Wall Street darlings through the 1990s have a had a rough go on this side of the millennium, though it bears noting that the stock has actually risen slightly over the past year.

The market's markdown since its all-time high has been more a matter of valuation than that of faulty fundamentals. After all, Costco continues to expand and same-store-sales are generally buoyant.

Three years ago, I argued that Costco wasn't worth 40 times earnings -- as it was trading at the time. "Realize that a quality, maturing company is worth a realistic multiple as it enters the golden years," I wrote. "Realistic is not what Costco is fetching right now."

However, today's multiple of just 21 times this year's earnings is clearly more reasonable. It's not only that rivals BJ's Wholesale Club (NYSE:BJ) and Wal-Mart's (NYSE:WMT) Sam's Club have continued to expand, crowding the niche in many areas. It's not even Costco's occasional operating hiccups, such as a bump in worker's compensation costs or the inflationary impact on expansion. Sure, these influences, in concert, helped take some of that growth stock shine off Costco. But it's certainly not a broken concept. No, it was simply that it was flat-out overvalued back in 2000.

Besides, it could be worse. Costco could be Kroger (NYSE:KR). The grocery giant also reports quarterly earnings tomorrow, but it's doing so in a damaged supermarket sector where everything from labor spats to Wal-Mart's growing offerings of discounted grub are slamming the leveraged collection of traditional grocers.

So, while Costco may not be exactly ripened at this point, at least it's not selling past its expiration date.

Tom Gardner recommended Costco in the May 2002 issue of Motley Fool Stock Advisor .

Where will Costco go from here? Is it overvalued, undervalued, or just right at today's prices? All this and more -- in the Costco discussion board. Only on Fool.com.