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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
Costco Wholesale Corporation (XNAS:COST) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
COST
Name:
COSTCO WHOLESALE CORPORATION (XNAS:COST)
Sector:
2.20B
Industry:
Discount Stores
CEO:
Mr. W. Craig Jelinek
Total Employees:
288,000
Our Technological Advancement Rating
Our Rating:
D
Technological advancement compared to industry is -13145.47% lower
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF COSTCO WHOLESALE CORPORATION(COST) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND DISCOUNT STORES INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
519.11
One Month Price Target:
$521.13
Six Month Price Target :
$531.22
Likely Price in One Year's Time:
Ticker:
$543.34
Likely Trading Range Today Under (Normal Volatility)
$518.14
Price Upper limit ($) :
$521.08
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$501.81
This week:
$480.42
This month :
$441.74
Other Primary facts
Market Cap:
229.85B
Market Cap Classification:
Large Cap
Number of Shares
IPO Date:
442.96M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
9.96%
-12.45%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$599.27
$561.70
$438.95
$476.52
Medium risk (<10%) entry points
Buy Call
Sell Call
$549.47
Buy Put:
Sell Put:
$541.45
$488.64
$496.77
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
COST
Sharpe Ratio:
5.22%
Comparison:
COST, is amongst the top 20% stocks with highest risk-adjusted returns
Sharpe ratio is 125.36% higher than the industry
& ratio is 129.22% higher than the market/S&P 500 average
Average Returns/Yield of
COST
Daily returns:
0.10%
Weekly returns:
0.48%
Monthly returns:
1.92%
Yearly returns:
13.35%
Comparison of returns:
Average annual returns/yield (last 3 years) is 72.72% above industry average
Classification:
COST, is amongst the top 40% highest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.83
Statistical test of Returns:
COST has not yielded statistically significant higher returns when compared to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
1.67%
Weekly Volatility:
3.73%
Monthly Volatility:
7.47%
Yearly Volatility:
25.86%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
1.42%
Volatility in last five trading days has been -14.99% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-3.33%
Weekly VaR:
-7.45%
Monthly VaR:
-14.90%
How Much Can the price of
COST
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-12%
Worst case (decline):
-51.63%
This translates to price declining to:
$456.43
This translates to price declining to:
$251.09
Severe Crash Probability
Risk of crash in next 6/12 months: Very high (>70%)
What is Value at Risk (VaR)?
Risk Fundamentals
COST is a 5.20% riskier investment compared to the market/S&P 500 & is -9.88% less risky than Nasdaq(IXIC)
Risk (measured by volatility) is -25.01% below industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
COST
Beta in relation to market/S&P 500--0.69
Expected beta in 1 year's time:
0.556
Expected beta in 3 year's time:
0.787
Unlevered (debt free) Beta:
0.503
Beta in relation to Nasdaq (XNAS):
0.599
Beta in relation to all global stocks::
0.415
Beta Comparison & Analysis
Beta of competitors/peers::
0.724
Beta is -4.11% lower than peers
Average Industry Beta:
0.701
Beta is -0.94% below industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
22.09%
Sustainable growth rate is 13.60% above industry average
Alpha provided | Alpha Analysis
Alpha provided:
0.152
Alpha is 180.68% above industry average alpha yield
Alpha is 964% higher than market/& is unsustainably high
Analysis of Cost of Capital of
COST
Equity cost of capital:
0.079
Equity cost of capital is -0.57% below industry mean WACC
Unlevered (without debt) cost of capital:
5.73%
Before-tax cost of debt:
1.60%
After-tax cost of debt:
1.27%
Overall debt rating:
Highest AAA investment grade
Weighted average cost of capital (WACC):
1.27%
WACC is 13.88% above industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$491.10
Revenue growth rate per share of (3Y):
12.1
Annual revenue growth rate is 7.26% above the industry average
EPS:
$12.70
Expected Annual growth rate of EPS (3Y):
14.23%
Expected future EPS growth rate is -24.80% lower than the Discount Stores industry
Free cash flow (FCF) per share:
$9.12
Balance sheet equity growth per share: 725.64%
Equity growth rate per share is 549.62% higher than the industry
Debt per share
$21.03
EBITDA per share
$21.58
Valuation Analysis Today of
COST
P/E Ratio:
40.89
P/E Ratio of Competitors/Peers:
21.21
P/E ratio is 92.80% higher than main peers & is 76.25% higher than the industry
Stock price/value with industry average P/E ratio: $294.61
COST is 76.20% overvalued if valued using industry average P/E ratio
-
-
P/S (Price to Sales ratio):
1.06
Price to sales ratio is 1.67% above the industry mean
P/B (Price to book value ratio):
12.1
Price to free cash flow: 56.94
-
Net income growth rate (3Y):
58.11%
Net income growth rate is 17.62% higher than the average industry net income growth rate
Dividend Analysis
Dividend payout rate: 6.20%
Dividend yeild: 0.63%
Previous Dividend: $0.90
Previous adjusted dividend: $0.90
Previous Dividend: $3.27
Expected next dividend best case: $3.22
Expected next dividend worst case: -$1.42
Average dividend payment (long-term): $1.59
Average dividend increase/decrease (growth rate) % per period: 115.46%
Expected next dividend payment date: 08/11/2022
Expected next dividend record date: 28/07/2022
Expected next dividend declaration date: 07/12/2022
Previous dividend payment date: 13/05/2022
Previous dividend record date: 29/04/2022
Previous dividend declaration date: 13/04/2022
Dividend History:
2022-04-28--$0.90
2021-10-28--$0.79
2021-04-29--$0.79
2022-02-03--$0.79
2021-07-29--$0.79
2021-02-04--$0.70
Dividend growth rate is 163.44% higher than the average industry
In-depth Debt & Leverage Analysis
Debt to equity ratio:
50.46%
Net debt to equity ratio:
-14.28%
Debt to assets ratio:
14.52%
Net debt to assets ratio:
-4.11%
Debt-to-asset ratio is -77.79% below industry average
Ability to repay debt:
Interest coverage ratio:
58.99
Interest coverage ratio is -77.57% less than industry average
Looking forward:
Debt growth rate:
-0.33%
Annual debt growth is -100% lower than industry average debt growth rate
Debt repayment rate in last quarter: 0.43%
Analysis of Key Statistics
Correlation of price movement with the market:
0.651
Statistical significance of correlation:
COST has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.493
Stock price is 31.99% more correlated with the market, compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.493
Correlation of price movement with Nasdaq (^IXIC):
0.041
Covariance of price movement with the market:
0.04
Kurtosis
8.909
Returns have a significant fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are more probable, compared to assets with normally distributed returns
Skewness of returns:
-0.019
Returns are, approximately, symmetrical
Fundamental Analysis & Dupont Analysis of
COST
Gross Profit Margin Ratio:
50%
Operating Profit Margin Ratio:
3.48%
Operating profit margin is -31.83% lower than the industry
Net Profit Margin Ratio:
50%
Effective Tax Rate:
24.74%
Effective tax rate is -6.65% lower than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
30.58%
Return on equity (ROE) is 26.58% higher than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
8.80%
Return on assets (ROA) is 13.26% higher than the industry
Financial Leverage:
1.2x
Current Ratio:
1.02
Current ratio is -22.50% below industry average
Cash Conversion Cycle (days):
-28.2
Cash conversion cycle is -156.18% below industry average
The remaining useful life of property plant & equipment is: 5.9 years
Stock based compensation to net income ratio:
6.87%
In-depth Efficiency Analysis
Revenue generated per employee:
755.3K
Each employee generates 103% more revenue than industry average revenue per employee
EBITDA generated per employee:
33.2K
Each employee generates 23% more EBITDA than industry average revenue per employee
Profit generated per employee:
19.6K
Each employee generates 27% more net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
7.6K
Each employee generates 614% more free cash flow than industry average revenue per employee
Assets/Capital per employee
105.2K
Each employee generates 614% more free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
-
-
Competitors/Peer firms of
COST
PEPSICO, INC. (XNAS:PEP)
Mondelez International, Inc. (XNAS:MDLZ)
MONSTER BEVERAGE CORPORATION (XNAS:MNST)
DOLLAR TREE, INC. (XNAS:DLTR)
CHS Inc. (XNAS:CHSCM)
NEWELL BRANDS INC. (XNAS:NWL)
CASEY'S GENERAL STORES, INC. (XNAS:CASY)
Innovator Lddrd Alloc PB (BATS:BUFF)
PILGRIM'S PRIDE CORPORATION (XNAS:PPC)
Current Analyst Ratings
Strong buy�29%
Buy�46%
Hold�46%
Sell�0%
Strong sell�0%
Overall analyst sentiment is: Buy
Income Statement
Period:
TTM
Date:
5/8/22
Revenue:
217.54B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
190.56B
26.98B
-
-
19.38B
-
35.00M
19.41B
34.00M
162.00M
1.87B
9.56B
7.57B
5.65B
7.62B
1.88B
5.65B
Statement of Cash Flow
Date:
Period:
432.00M
Differed Income Tax :
- 2000.00K
Stock Based Compensation :
388.00M
Change in Working Capital :
912.00M
Accounts Receivables:
-
Other Working Capital:
283.00M
Other Non-Cash Items:
204.00M
Net Cash Provided by Operating Activities:
3.26B
Investments in PP&E:
- 1055000.00K
Net Acquisitions:
-
Purchases of Investments:
- 258000.00K
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
11/21/21
2022
Q1
12.75B
725.00M
13.48B
1.93B
16.94B
1.50B
33.85B
26.79B
-
-
-
-
3.51B
30.30B
-
64.15B
19.56B
799.00M
-
-
12.98B
33.34B
9.32B
2.49B
11.81B
-
45.15B
4.00M
12.61B
- 1211000.0K
7.06B
November 21, 2021 at 12:00:00 AM
209.97B
18.46B
63.61B
-
10.12B
- 2636000.0K
444.00M
- 43000.00K
- 912000.00K
- 40000.00K
-
- 37000.00K
- 350000.00K
- 412000.00K
- 839000.00K
- 14000.00K
1.49B
12.75B
11.26B
3.26B
- 1055000.00K
2.20B
Our Proprietary Portfolio Rating
Our Rating:
D
Price Forecast/Expected Price in Next 5 Years of
COST
2023
2024
2025
2026
2027
$564.77
$591.13
$618.72
$647.60
$677.82