In Q4 2025, Costco Wholesale Corporation reported strong sales and stable business model with $67.3 billion in quarterly revenue. Despite this, the company's high valuation makes it unattractive for new investors as a buy. However, existing shareholders may consider holding onto their stock due to the 15% year-to-date surge in sales and positive catalysts such as strong January sales.
Despite an impressive revenue growth of 21.88% QoQ and 8.3% YoY, Costco's operating margin was only 3.8%, below the sector average of 15.7%. Furthermore, its net margin was 2.96%, also lower than the industry average. While these margins are concerning, they are not necessarily indicative of the company's profitability or growth potential.
Looking ahead, Costco's 3-year revenue CAGR of 4.34% and 3-year profit CAGR of 8.57% suggest steady growth. However, it has not grown in consecutive quarters, which could be a cause for concern. Additionally, the company's valuation concerns with a P/E ratio of 53 pricing in 15% annual earnings growth when actual EPS growth was only 10% in fiscal 2025 need to be addressed.
Based on these findings, investors should consider holding onto their Costco stock but may want to monitor the company's growth and profitability closely. Overall, while Costco has shown strong sales and a stable business model, its high valuation and margin concerns warrant careful evaluation before making investment decisions.