Costco Wholesale Corporation (COST): Does It Deserve Its High Stock Price?

Other discount retailers include Big Lots, Inc. (NYSE:BIG) and PriceSmart, Inc. (NASDAQ:PSMT). Big Lots is the cheapest of all of these companies by earnings multiples, with trailing and forward P/Es of 12 and 10 respectively. There is considerable short interest in the stock, and it is down 20% in the last year, but the company has been achieving at least some growth recently and at that pricing it might be worth taking a closer look at Big Lots, Inc. (NYSE:BIG). PriceSmart, Inc. (NASDAQ:PSMT), which operates membership warehouse clubs in Latin America and the Caribbean, reported double-digit growth rates on both top and bottom lines in its most recent quarter compared to the same period in the previous fiscal year. However, investor optimism has bid up the price to 26 times forward earnings estimates. It’s possible that the company is worth its premium to Costco, but we would still be wary when comparing that multiple to revenue growth of about 11%.

Costco Wholesale Corporation (NASDAQ:COST) is performing better in financial terms than Wal-Mart, Target, and Big Lots, but its pricing in the market is quite a bit higher and so we wouldn’t consider it a good value. In fact, investors who are looking at going long one of those other three companies might consider pairing it with a short in Costco on the theory that if Wal-Mart (for example) is in fact having a bad quarter than that company should be as well.

The article Does Costco Deserve Its High Stock Price? originally appeared on Fool.com and is written by Meena Krishnamsetty.

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