Costco Overvaluation and Target Entry Point

23 days ago

Speaker

"Now, the second kind of stock is Costco. Costco I would put it in the mid-stage, mainly operating leverage with capital return. I look at its current trading multiple of 49 times earnings and think it's too extreme. I prefer modeling it at 40 times earnings. In this case the upside from here is only 47% or an 8.3% annual return. And if I want to double my money over the next 5 years or get a 15% annual return, then I would have to buy Costco at 637 per share, which is about 25% lower than here."

The speaker evaluates Costco's valuation, arguing that its current 49x earnings multiple is too high compared to a more sustainable 40x. For a target annual return of around 15% and the possibility to double the investment over five years, the speaker suggests waiting for an entry point around $637 per share.

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