Costco Looks Expensive. Is It a Buy?
Without knowing anything more about a company than that its forward-looking price-to-earnings (P/E) ratio stands at 33.0 in anticipation of 10% earnings growth next year, most people probably wouldn't be interested in buying the stock. Not many investors can say they haven't paid more for weaker earnings growth at some point in their lives. By and large, though, those are the kinds of numbers usually best left avoided by stock investors.
But what if those numbers describe a popular stock like Costco (NASDAQ: COST)?
And there's the rub. Investors have historically loved to love Costco at almost any valuation. But, after years of rising valuation levels that have accelerated higher since the coronavirus pandemic took hold, there's almost no room left for further upside. If anything, Costco is due for a pullback that would put its stock's price more in line with valuations of rivals like Walmart (NYSE: WMT), Target (NYSE: TGT), and Kroger (NYSE: KR).
Source Fool.com
