Photo by Omar Abascal on Unsplash
 

Profile

Costco Wholesale Corporation (COST) operates membership warehouses that offer branded and private-label products across a wide range of categories, including groceries, electronics, apparel, and household goods. Its low-margin, high-volume model enables it to deliver consistently strong sales growth and exceptional customer loyalty.

With over 870 warehouses globally and an expanding e-commerce platform, Costco continues to benefit from scale efficiencies, membership fee growth, and disciplined cost control. The company’s subscription-based business model drives recurring revenue and stable cash flows, while its limited SKU strategy enhances inventory turnover and pricing power against competitors.
 

DCF Analysis

Inputs
Discount Rate: 10%
Terminal Growth Rate: 3%
WACC: 10%

Forecasted Free Cash Flows (in billions USD)

Total Present Value of FCFs = $33.5B

Terminal Value Calculation

Using perpetuity growth model with 2029 FCF = $9.8B:
TV = (9.8 × 1.03) ÷ (0.10 − 0.03) = $144.2B

Present Value of Terminal Value = $92.8B

Enterprise Value

Enterprise Value = 33.5B + 92.8B = $126.3B

Net Debt

Cash & Equivalents: $15.3B
Total Debt: $8.1B
Net Debt = –$7.2B (net cash)

Equity Value & Per-Share Value

Equity Value = 126.3B + 7.2B = $133.5B
Shares Outstanding: ~444 million

Intrinsic Value per Share ≈ $301
 

Conclusion

DCF Value: $301
Current Price: ~$890.60
Margin of Safety: –66%

Costco remains one of the most resilient and consistently profitable retailers globally. Its membership-based model, cost discipline, and powerful brand loyalty continue to generate strong free cash flow growth. However, under conservative DCF assumptions, the shares trade well above intrinsic value. While Costco merits a quality premium, long-term investors may prefer to wait for a more attractive valuation before initiating or adding to positions.

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