We came across a bullish thesis on Costco Wholesale Corporation (COST) on Substack by FluentInQuality. In this article, we will summarize the bulls’ thesis on COST. Costco Wholesale Corporation (COST)’s share was trading at $1046.85 as of March 3rd. COST’s trailing and forward P/E were 61.51 and 57.80 respectively according to Yahoo Finance.
A busy shopping aisle filled with discounted items in a retail store.
Costco operates on a simple yet powerful business model that turns bulk retail into a recurring revenue machine. Unlike traditional retailers that rely solely on product markups, Costco’s true profit engine is its membership fees. Customers willingly pay for access, creating a sticky, high-retention revenue stream. Costco’s success isn’t just about memberships—it’s about efficiency. The company eliminates unnecessary costs by forgoing flashy displays and extravagant branding, opting instead for a no-frills, warehouse-style approach. Bulk buying and rapid inventory turnover allow Costco to offer the lowest prices, reinforcing its value proposition and strengthening customer loyalty.
The food court is another strategic lever. Selling $1.50 hot dogs and rotisserie chickens at a loss isn’t a mistake—it’s a calculated move to drive foot traffic. Once inside, customers spend more, fueling Costco’s relentless cycle of volume-driven growth. This model has translated into steady financial performance, with a five-year revenue CAGR of 10.8% and a long-term EPS growth estimate of 9.4%. Despite operating on razor-thin gross margins of 12.7%, Costco’s scale, operational discipline, and capital efficiency generate a robust 15.3% return on invested capital.
Costco isn’t just a retailer—it’s a system, a high-quality compounder that thrives on loyalty, cost leadership, and operational excellence. Investors seeking durable, cash-generating businesses with a proven formula for long-term growth may find Costco’s model to be a prime example of sustainable wealth creation.
Costco Wholesale Corporation (COST) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 96 hedge fund portfolios held COST at the end of the fourth quarter which was 75 in the previous quarter. While we acknowledge the risk and potential of COST as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than COST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.