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Costco (COST) is a truly great company. Shoppers love it because of the great value it provides and investors love it as well because of its consistently excellent financial performance. There is no question about the quality of the company. The problem is that that is more than priced in. Way more. A mature retailer selling consumer staples, COST stock is up 63% over the last 12 months. The stock trades in excess of 50x current year earnings. That just doesn’t make sense.

I have no doubt that COST will report an excellent quarter when it reports 4QFY24 earnings after the close Thursday. We already know that comps were +6.9%. But to believe the stock will continue to go higher from these levels is to substitute hope for rationality as an investment philosophy. Yes, the stock could go higher. The stock market can do anything. The point is that it doesn’t make sense and at some point a stock tends to revert to its intrinsic value. Will Thursday’s earnings report be that time? I don’t know but it’s coming…

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