Defying Gravity: On the Trail of Costco's Soaring ارتفاع

The shares of Costco currently seem to defy gravity. The retail giant's market value has increased by a remarkable 50% over the past year, puzzling even seasoned investors. Despite compelling arguments indicating overvaluation, the central question remains: Is Costco a worthwhile investment or is caution advised? Competition in retail is fierce, yet Costco skillfully leverages its unique advantages. Compared to competitors like Amazon, which operate with lower operating costs, Costco benefits from selling in large quantities, facilitating price reductions. Internationally, Costco has positioned itself more strategically than other retail giants by avoiding cultural pitfalls and tapping into further growth potential in the U.S. and abroad. Another secret to success is high customer loyalty. Globally, 90% of members renew their membership, with 93% doing so in the U.S. despite price increases. However, this loyalty comes at a price: The stock is trading at a P/E ratio of 57 near an all-time high. The prospect of further rising prices is hindered by earnings not growing sufficiently in comparison. In the first quarter of fiscal year 2025, revenue increased by 8% year-over-year to 62 billion dollars. This solid but by no means exceptional growth rate was demonstrated by the company in fiscal year 2024 with a revenue growth of 5%. Net profit grew by 13% in the first quarter, which is below the 17% increase in fiscal year 2024.