By Anton Ladnyi, CFA · ex-Goldman Sachs · ex-J.P. MorganPublished Updated
COST — Costco on ~47x forward P/E with Q3 FY2026 (ended May 10) revenue $69.15B (+11.6%), comp sales +9.8%, digital +21.5%, EPS $4.93 vs $4.91 consensus; 82.9M paid members (+4.1%); gas station traffic surge driving first-time memberships; 28 new warehouses planned FY2026.
COST Price Target & Rating
COST's quantitative grade is Hold, with limited downside risk (CVaR -7.9%), and quality metrics (net margin 3%, ROE 29%). Costco Wholesale Corporation (COST) trades at $951.45 with a valuation grade of Hold: a trailing P/E of 48.0x at a 100% premium to sector median, net margins of 3.0%, a DCF-implied intrinsic range of $628–$1,098 suggesting a -9% margin of safety, beta 0.87 (moderate risk profile).
DCF Valuation Range
Key Takeaways
Valuation: Hold grade — P/E 48.0x — DCF range $628–$1,098 implies -9% margin of safety
Risk: CVaR -7.9% (95th percentile, 1-month) indicates moderate tail exposure; beta of 0.87 amplifies broad market moves in both directions
Strengths: Size 4.5/5, 3% net margin, 29% ROE dominate the factor profile
Catalyst: Q4 FY2026 results (September) — final quarter before fiscal year close; next fee increase announcement; China store expansion milestone
Bear catalyst: Comparable sales fall below 4% for two consecutive quarters; membership renewal rate drops below 90%; new warehouse returns below 20% ROIC
COST — Quantitative SnapshotJune 2026
RatingHold
Price$951.45
Why HoldHigh-quality business at a fully-priced valuation — limited margin for error on earnings
Main riskPremium multiple (48.0x P/E) demands consistent delivery
Tail riskCVaR -7.9% over one month at the 95th percentile
DCF range$628–$1,098 intrinsic range; margin of safety -9%
Best useCore large-cap Consumer Defensive holding — not a source of diversified sector exposure
Next watchEarnings surprise deceleration trend — monitor next quarter delivery closely
Anton Ladnyi, CFA · A.L. Capital AdvisoryUpdated 2026-06-19
Rating Rationale
COST — Costco on ~47x forward P/E with Q3 FY2026 (ended May 10) revenue $69.15B (+11.6%), comp sales +9.8%, digital +21.5%, EPS $4.93 vs $4.91 consensus; 82.9M paid members (+4.1%); gas station traffic surge driving first-time memberships; 28 new warehouses planned FY2026.
Investment Thesis
↑ Bull Case
Q3 FY2026 comp sales +9.8% (+6.6% adjusted for gas/FX) — broad-based strength; digital +21.5%; gas volume top-5 weeks ever in final 5 weeks
Membership flywheel: 82.9M paid members (+4.1%); executive memberships 41.2M (+9.6%); fee income +10.7% — recurring high-margin revenue
Tariff environment driving members to bulk purchasing and Costco's value proposition; CEO pledging to pass tariff savings creates brand trust
International expansion momentum (China entry, additional Europe) with strong unit economics; 28+ new warehouses per year target
Costco trades as a 'membership-fee business with retail attached' — fees at 75-80% gross margin are structurally high-quality earnings
↓ Bear Case
47x forward P/E is extreme for a retailer even accounting for the membership model; any comparable sales miss causes disproportionate multiple compression
Merchandise gross margins structurally thin (~13%); tariff cost pass-through erodes merchandise margins even as membership holds
Consumer slowdown: big-ticket discretionary categories (electronics, appliances) could soften; Costco not immune to recessionary top-line pressure
$6.5B CapEx plan for 28+ new warehouses requires perfect execution; international expansion carries regulatory and consumer behavior risk
What Changes the Rating
↑Catalyst:Executive membership penetration crosses 55% of total; international warehouses exceed 20% of total; digital comp sustains above 20%
↓Stop / exit:Comparable sales fall below 4% for two consecutive quarters; membership renewal rate drops below 90%; new warehouse returns below 20% ROIC
Anton’s personal note
COST is not a name I am actively adding to. The business quality is real, but at 48x I am already paying for a lot of the future, and the margin of safety does not justify conviction-sized exposure. What I pay attention to above all else is the earnings surprise trajectory. The beat streak is intact, but the magnitude has compressed from +1.1% to +0.1% — and at a 48x multiple, the market is not pricing in a miss. That asymmetry is worth respecting. Re-accelerating earnings surprise magnitude would shift my view constructive. Continued compression of beat magnitude at this multiple would move me toward a reduce.
— Anton Ladnyi, CFA
Earnings History
COST Earnings History — EPS Surprise Rate 2026
Quarter
EPS Est.
EPS Actual
Surprise
Q2 2026
$4.92
$4.93
+0.1% ✓
Q1 2026
$4.54
$4.58
+0.8% ✓
Q4 2025
$4.28
$4.50
+5.3% ✓
Q3 2025
$5.80
$5.87
+1.1% ✓
Quarterly EPS — Estimate vs Actual
Earnings Projections
COST Forward EPS Consensus Estimates 2026
Quarter
EPS Est.
YoY EPS
Analysts
Q3 2026
$6.55
+11.6%
27
Q4 2026
$4.86
+8.1%
15
Q1 2027
~$4.23
-7.6%
30
Q2 2027
~$5.67
+15.0%
32
~ Estimated from annual consensus — not a direct analyst survey
COST — P/E 48.0x · Beta 0.87 • Quantitative grade: Hold • CVaR from one-year daily history · historical simulation
DCF Scenario Analysis
Hover each scenario for detail · current price $951.45
▼
Bear Case
$680
-28.5%
Fwd P/E: 31.9x
5.0 revenue CAGR · 32.0 exit multiple
◆
Base Case
$1,050
+10.4%
Fwd P/E: 49.3x
9.0 revenue CAGR · 42.0 exit multiple
▲
Bull Case
$1,450
+52.4%
Fwd P/E: 68.0x
13.0 revenue CAGR · 52.0 exit multiple
Pairwise Correlation Matrix
0 of 10 peer pairs correlated above 0.60 — diversification benefit within this cluster is structurally limited.
Extended Analysis — Buy, Hold or Sell? Risk Factors. Portfolio Fit.
Is COST a buy, hold, or sell?
COST carries a valuation grade of Hold. The trailing P/E of 48.0 sits 100% above the Consumer Defensive sector median of 24.0x — a premium that demands sustained earnings delivery. Our discounted cash flow model produces an intrinsic range of $628–$1,098 — implying a -9% margin of safety at the current price of $951.45. The width of the DCF range reflects genuine uncertainty in the terminal growth rate assumption: the correct framework is a probability-weighted distribution over scenarios, not a single point estimate. See the DCF valuation framework for full methodology.
With a 12% beat rate on recent quarters, earnings predictability has been mixed. The most recent quarter delivered a 14.0% earnings surprise. Analyst estimate revisions are trending upward.
What are COST's key risk factors?
With a beta of 0.87, COST exhibits a defensive risk profile relative to the broad market. The 95th-percentile CVaR of -7.9% on a one-month horizon should inform position sizing directly: at a 10% portfolio weight, this tail event contributes approximately 0.8% of total portfolio loss in the worst 5% of months. Net margins of 3.0% fall below the Consumer Defensive sector average of 12%, suggesting margin pressure. Return on equity of 29.2% indicates highly efficient capital allocation. The balance sheet is conservatively leveraged at 60% debt-to-equity.
The options market shows a put/call ratio of 1.90, reflecting a notably bearish skew in derivative positioning. Implied and realized volatility are roughly aligned at 23.4% and 22.9% respectively. Insiders have been net sellers to the tune of $56.7M recently. While routine dispositions are common, the magnitude bears watching. Short interest is low at 1.8% of float, suggesting limited bearish conviction.
How does COST fit in a diversified portfolio?
At typical HENRY portfolio weights — 10–20% of the equity allocation — COST carries a beta of 0.87, meaning it amplifies broad market moves proportionally. The appropriate weight is not a function of conviction alone, but of the full covariance structure across all holdings. See the Ledoit-Wolf covariance framework for the methodology behind these calculations.
Among closely correlated names, COST shows the strongest co-movement with WMT (0.60), KO (0.27), HD (0.20). Investors seeking diversification should note these correlation dynamics when constructing multi-asset portfolios.
True portfolio risk is a function of the full covariance structure across all holdings — not individual stock metrics. The Portfolio Health Check quantifies this at the portfolio level: it surfaces hidden concentration, marginal CVaR contributions, and the degree to which your overall allocation deviates from an optimal risk-adjusted mandate. The COST analysis here is a single node in that larger structure.
For the portfolio construction framework underpinning COST’s position sizing and conviction rating — including IPS guardrails, Black-Litterman allocation, and CVaR constraints — see: Investment Policy Statement Framework →
Investor FAQ
Is COST a buy or sell in 2026?
Costco Wholesale Corporation (COST) carries a Hold quantitative rating from A.L. Capital Advisory, derived from Discounted Cash Flow intrinsic value analysis, five-factor model scoring (Value, Quality, Momentum, Volatility, Size), and CVaR tail risk measurement. At $951.45, the DCF midpoint margin of safety is -9% (intrinsic value range: $628 bear – $1,098 bull). Composite factor score: 3.3/5. Strongest factor: Size (4.5/5). Weakest factor: Value (2.0/5). Trailing P/E: 48.0x. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Portfolio Construction Framework →
What is the average analyst target price for COST?
Wall Street consensus target for COST: $1,082.94 (+13.8% upside from the current price of $951.45). The analyst target range spans $740.00 (most bearish) to $1,315.00 (most bullish). Consensus recommendation: Buy. Note that analyst price targets typically reflect a 12-month forward horizon and are derived from a blend of DCF, comparable-company, and sum-of-the-parts analysis. A.L. Capital Advisory’s quantitative Hold rating is produced independently — from DCF intrinsic value, five-factor model scores, and CVaR tail risk — and does not mechanically track Street consensus. When the two diverge, the divergence itself is informative: it can reflect differences in time horizon, valuation methodology, or the degree to which the current price already discounts the consensus case. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Monte Carlo Simulation Framework →
How does COST score on Value, Quality, Momentum, Volatility, and Size?
COST five-factor scores (A.L. Capital Advisory, 1–5 scale): Value 2.0/5 (below average) — measures current price versus DCF intrinsic range and trailing earnings multiples; Quality 3.0/5 (neutral) — captures profitability metrics including return on equity, net margin (ROE: 29.2%) and net margin (3.0%); Momentum 3.0/5 (neutral) — reflects recent price trajectory and earnings surprise consistency; Volatility 4.0/5 (above average) — inverse measure derived from beta, where lower historical volatility earns a higher score; Size 4.5/5 (strong) — market capitalisation rank (mega-cap $1T+ scores 5/5). Composite: 3.3/5. Factor scores above 4.0 signal a tailwind in that dimension; below 2.0 signals a material headwind. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Black-Litterman Model →
What is COST's tail risk and CVaR?
The 95th-percentile Conditional Value at Risk (CVaR) for COST on a one-month horizon is -7.9%. CVaR represents the expected average loss in the worst 5% of monthly outcomes — a more conservative tail risk measure than standard VaR, which only marks the loss threshold. Beta of 0.87 indicates broadly market-level volatility. For reference, a diversified S&P 500 ETF carries a one-month CVaR of roughly -8% to -12% in normal market conditions; individual equity CVaR is higher due to idiosyncratic risk. At the portfolio level, what matters is the marginal CVaR contribution of each holding — not its standalone figure. The A.L. Capital Advisory Portfolio Health Check quantifies each position's marginal tail-risk contribution across your entire holdings. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: CVaR & Tail-Risk Methodology →
What is COST's intrinsic value and DCF price target?
A.L. Capital Advisory's DCF model produces an intrinsic value range of $628 (bear case) to $1,098 (bull case) for Costco Wholesale Corporation (COST). At $951.45, the midpoint margin of safety is -9% (positive = discount to intrinsic mid; negative = premium). The bear-to-bull spread reflects genuine sensitivity to the two dominant DCF inputs: the terminal growth rate and WACC. Terminal value typically accounts for 60-80% of total intrinsic value in most equity DCF models, which is why a range is more analytically sound than a point estimate. The central analytical question is not what the DCF outputs as a single number but which growth trajectory the current market price already discounts. All DCF analysis follows CFA Institute standards and is conducted by Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: DCF Valuation Framework →
What would trigger a rating upgrade or downgrade for COST?
Upgrade trigger: A price pullback that opens the margin of safety beyond +15% (approximately $534 based on the DCF bear case). Downgrade trigger: An earnings miss at current valuations (48.0x trailing P/E) where there is limited earnings cushion to absorb negative surprises; or a sustained reversal in the Quality and Momentum factor scores for two or more consecutive quarters. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Investment Policy Statement Framework →
Does COST consistently beat earnings estimates?
COST has beaten consensus EPS estimates in 12% of tracked quarterly periods — indicating inconsistent delivery. The most recent reported quarter beat consensus by 14.0%. Below-average earnings consistency is a primary headwind to the rating and a key watch item in the quantitative model. Earnings surprise magnitude and direction are incorporated into the Momentum and Quality dimensions of the five-factor scoring model. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: DCF Valuation Framework →
How does COST contribute to portfolio risk and diversification?
COST carries a beta of 0.87 (moderate-volatility relative to the broad equity market). A beta above 1.0 means the position amplifies market moves in both directions at a typical portfolio weight. Strongest peer co-movement: WMT (0.60), KO (0.27), HD (0.20). Holding COST alongside these names in the same portfolio increases concentration risk. True portfolio risk is a function of the full covariance structure — a single stock's beta does not reveal its marginal contribution to portfolio tail loss. The A.L. Capital Advisory Portfolio Health Check quantifies concentration risk (Herfindahl-Hirschman Index), pairwise correlations, and marginal CVaR contribution across all your holdings. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Ledoit-Wolf Covariance Framework →
What quantitative methodology does A.L. Capital Advisory use to analyse COST?
A.L. Capital Advisory analyses Costco Wholesale Corporation (COST) using a four-component quantitative framework grounded in CFA Institute standards. (1) DCF Valuation: projects free cash flows under bear and bull assumptions, discounts at WACC to produce an intrinsic value range with margin-of-safety calculation. (2) Five-Factor Scoring: each equity is scored 1–5 on Value, Quality, Momentum, Volatility, and Size. (3) CVaR Tail Risk: 95th-percentile Conditional Value at Risk from historical simulation of daily returns on a one-month horizon. (4) Earnings Surprise Analysis: quarterly beat rate and magnitude are incorporated into the Momentum and Quality factor scores. The current Hold rating for COST is the output of applying this complete framework to current data. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: DCF Valuation Framework → · CVaR & Tail-Risk Methodology →
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This analysis is produced using a systematic quantitative framework applied to market data and does not constitute investment advice. Prose commentary is AI-assisted and generated from structured quantitative inputs. All data and metrics are as of 2026-06-19 and are point-in-time estimates subject to revision without notice. CVaR figures are based on historical simulation and do not guarantee future outcomes. DCF ranges and upgrade/downgrade triggers are forward-looking statements based on current assumptions and may not materialise. Past performance does not guarantee future results. This analysis does not account for individual circumstances, tax position, or investment objectives — consult a qualified financial advisor before making investment decisions. This content is intended for informational purposes only and does not constitute regulated investment advice under MiFID II or FCA guidelines. This content is not intended for US persons or residents of jurisdictions where its distribution would be contrary to local law or regulation. This service is not directed at residents of Finland, Sweden, Norway, Denmark, Iceland, or Poland. The author may hold long or short positions in securities mentioned in this analysis. Nothing on this page represents a solicitation to buy or sell any security. A.L. Capital Advisory is an independent private advisory practice and is not affiliated with Costco Wholesale Corporation.
CFA Portfolio Advisory — COST
Discuss this analysis, position sizing, or your full portfolio mandate with Anton Ladnyi, CFA.
