Intrinsic value of Costco Wholesale - COST

Previous Close

$233.92

  Intrinsic Value

$184.11

stock screener

  Rating & Target

sell

-21%

Previous close

$233.92

 
Intrinsic value

$184.11

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of COST stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 102.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.80
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
Revenue, $m
  144,637
  161,111
  178,432
  196,589
  215,577
  235,393
  256,045
  277,542
  299,902
  323,146
  347,304
  372,407
  398,495
  425,611
  453,805
  483,129
  513,642
  545,406
  578,488
  612,961
  648,900
  686,386
  725,505
  766,345
  809,003
  853,576
  900,171
  948,896
  999,867
  1,053,204
Variable operating expenses, $m
  138,418
  154,183
  170,760
  188,136
  206,307
  225,271
  245,035
  265,608
  287,006
  309,251
  332,370
  356,393
  381,360
  407,310
  434,291
  462,355
  491,555
  521,953
  553,613
  586,604
  620,997
  656,872
  694,308
  733,393
  774,216
  816,873
  861,464
  908,093
  956,872
  1,007,916
Fixed operating expenses, $m
  1,446
  1,478
  1,510
  1,544
  1,578
  1,612
  1,648
  1,684
  1,721
  1,759
  1,798
  1,837
  1,878
  1,919
  1,961
  2,004
  2,048
  2,093
  2,140
  2,187
  2,235
  2,284
  2,334
  2,385
  2,438
  2,492
  2,546
  2,602
  2,660
  2,718
Total operating expenses, $m
  139,864
  155,661
  172,270
  189,680
  207,885
  226,883
  246,683
  267,292
  288,727
  311,010
  334,168
  358,230
  383,238
  409,229
  436,252
  464,359
  493,603
  524,046
  555,753
  588,791
  623,232
  659,156
  696,642
  735,778
  776,654
  819,365
  864,010
  910,695
  959,532
  1,010,634
Operating income, $m
  4,773
  5,450
  6,162
  6,910
  7,692
  8,510
  9,362
  10,250
  11,175
  12,136
  13,136
  14,176
  15,258
  16,382
  17,552
  18,770
  20,038
  21,359
  22,735
  24,171
  25,668
  27,231
  28,863
  30,567
  32,349
  34,212
  36,161
  38,200
  40,335
  42,570
EBITDA, $m
  6,310
  7,162
  8,058
  8,998
  9,983
  11,011
  12,083
  13,199
  14,361
  15,570
  16,826
  18,133
  19,492
  20,904
  22,374
  23,903
  25,496
  27,154
  28,882
  30,683
  32,563
  34,524
  36,571
  38,710
  40,945
  43,281
  45,725
  48,282
  50,958
  53,760
Interest expense (income), $m
  131
  355
  521
  697
  882
  1,076
  1,279
  1,491
  1,712
  1,942
  2,181
  2,430
  2,688
  2,957
  3,236
  3,526
  3,827
  4,141
  4,467
  4,807
  5,160
  5,529
  5,913
  6,314
  6,732
  7,169
  7,625
  8,102
  8,600
  9,121
  9,666
Earnings before tax, $m
  4,418
  4,929
  5,465
  6,027
  6,616
  7,230
  7,871
  8,538
  9,233
  9,955
  10,707
  11,488
  12,301
  13,147
  14,027
  14,943
  15,898
  16,892
  17,929
  19,010
  20,139
  21,317
  22,548
  23,835
  25,180
  26,587
  28,059
  29,600
  31,213
  32,903
Tax expense, $m
  1,193
  1,331
  1,476
  1,627
  1,786
  1,952
  2,125
  2,305
  2,493
  2,688
  2,891
  3,102
  3,321
  3,550
  3,787
  4,035
  4,292
  4,561
  4,841
  5,133
  5,438
  5,756
  6,088
  6,435
  6,799
  7,178
  7,576
  7,992
  8,428
  8,884
Net income, $m
  3,225
  3,598
  3,989
  4,400
  4,829
  5,278
  5,746
  6,233
  6,740
  7,267
  7,816
  8,386
  8,980
  9,597
  10,240
  10,909
  11,605
  12,331
  13,088
  13,878
  14,702
  15,562
  16,460
  17,400
  18,381
  19,408
  20,483
  21,608
  22,786
  24,019

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  40,743
  45,383
  50,263
  55,377
  60,726
  66,308
  72,125
  78,181
  84,479
  91,027
  97,832
  104,903
  112,252
  119,891
  127,832
  136,093
  144,688
  153,635
  162,954
  172,665
  182,789
  193,348
  204,368
  215,872
  227,888
  240,444
  253,569
  267,295
  281,653
  296,677
Adjusted assets (=assets-cash), $m
  40,743
  45,383
  50,263
  55,377
  60,726
  66,308
  72,125
  78,181
  84,479
  91,027
  97,832
  104,903
  112,252
  119,891
  127,832
  136,093
  144,688
  153,635
  162,954
  172,665
  182,789
  193,348
  204,368
  215,872
  227,888
  240,444
  253,569
  267,295
  281,653
  296,677
Revenue / Adjusted assets
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
  3.550
Average production assets, $m
  19,671
  21,911
  24,267
  26,736
  29,318
  32,013
  34,822
  37,746
  40,787
  43,948
  47,233
  50,647
  54,195
  57,883
  61,717
  65,706
  69,855
  74,175
  78,674
  83,363
  88,250
  93,349
  98,669
  104,223
  110,024
  116,086
  122,423
  129,050
  135,982
  143,236
Working capital, $m
  -6,653
  -7,411
  -8,208
  -9,043
  -9,917
  -10,828
  -11,778
  -12,767
  -13,795
  -14,865
  -15,976
  -17,131
  -18,331
  -19,578
  -20,875
  -22,224
  -23,628
  -25,089
  -26,610
  -28,196
  -29,849
  -31,574
  -33,373
  -35,252
  -37,214
  -39,265
  -41,408
  -43,649
  -45,994
  -48,447
Total debt, $m
  9,646
  12,909
  16,339
  19,934
  23,694
  27,619
  31,708
  35,965
  40,393
  44,996
  49,780
  54,751
  59,917
  65,287
  70,870
  76,677
  82,720
  89,010
  95,561
  102,388
  109,505
  116,928
  124,674
  132,762
  141,209
  150,036
  159,263
  168,912
  179,006
  189,568
Total liabilities, $m
  28,642
  31,905
  35,335
  38,930
  42,690
  46,615
  50,704
  54,961
  59,389
  63,992
  68,776
  73,747
  78,913
  84,283
  89,866
  95,673
  101,716
  108,006
  114,557
  121,384
  128,501
  135,924
  143,670
  151,758
  160,205
  169,032
  178,259
  187,908
  198,002
  208,564
Total equity, $m
  12,101
  13,479
  14,928
  16,447
  18,036
  19,693
  21,421
  23,220
  25,090
  27,035
  29,056
  31,156
  33,339
  35,607
  37,966
  40,420
  42,972
  45,630
  48,397
  51,282
  54,288
  57,424
  60,697
  64,114
  67,683
  71,412
  75,310
  79,387
  83,651
  88,113
Total liabilities and equity, $m
  40,743
  45,384
  50,263
  55,377
  60,726
  66,308
  72,125
  78,181
  84,479
  91,027
  97,832
  104,903
  112,252
  119,890
  127,832
  136,093
  144,688
  153,636
  162,954
  172,666
  182,789
  193,348
  204,367
  215,872
  227,888
  240,444
  253,569
  267,295
  281,653
  296,677
Debt-to-equity ratio
  0.800
  0.960
  1.090
  1.210
  1.310
  1.400
  1.480
  1.550
  1.610
  1.660
  1.710
  1.760
  1.800
  1.830
  1.870
  1.900
  1.920
  1.950
  1.970
  2.000
  2.020
  2.040
  2.050
  2.070
  2.090
  2.100
  2.110
  2.130
  2.140
  2.150
Adjusted equity ratio
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,225
  3,598
  3,989
  4,400
  4,829
  5,278
  5,746
  6,233
  6,740
  7,267
  7,816
  8,386
  8,980
  9,597
  10,240
  10,909
  11,605
  12,331
  13,088
  13,878
  14,702
  15,562
  16,460
  17,400
  18,381
  19,408
  20,483
  21,608
  22,786
  24,019
Depreciation, amort., depletion, $m
  1,537
  1,712
  1,896
  2,089
  2,291
  2,501
  2,720
  2,949
  3,186
  3,433
  3,690
  3,957
  4,234
  4,522
  4,822
  5,133
  5,457
  5,795
  6,146
  6,513
  6,895
  7,293
  7,708
  8,142
  8,596
  9,069
  9,564
  10,082
  10,624
  11,190
Funds from operations, $m
  4,762
  5,310
  5,885
  6,489
  7,120
  7,779
  8,466
  9,182
  9,926
  10,701
  11,506
  12,343
  13,214
  14,119
  15,061
  16,042
  17,063
  18,126
  19,235
  20,390
  21,596
  22,855
  24,169
  25,542
  26,977
  28,478
  30,047
  31,690
  33,409
  35,210
Change in working capital, $m
  -718
  -758
  -797
  -835
  -873
  -912
  -950
  -989
  -1,029
  -1,069
  -1,111
  -1,155
  -1,200
  -1,247
  -1,297
  -1,349
  -1,404
  -1,461
  -1,522
  -1,586
  -1,653
  -1,724
  -1,799
  -1,879
  -1,962
  -2,050
  -2,143
  -2,241
  -2,345
  -2,454
Cash from operations, $m
  5,480
  6,068
  6,682
  7,324
  7,993
  8,691
  9,416
  10,170
  10,955
  11,770
  12,617
  13,498
  14,414
  15,367
  16,358
  17,391
  18,466
  19,587
  20,756
  21,976
  23,249
  24,579
  25,968
  27,421
  28,939
  30,528
  32,191
  33,931
  35,754
  37,663
Maintenance CAPEX, $m
  -1,375
  -1,537
  -1,712
  -1,896
  -2,089
  -2,291
  -2,501
  -2,720
  -2,949
  -3,186
  -3,433
  -3,690
  -3,957
  -4,234
  -4,522
  -4,822
  -5,133
  -5,457
  -5,795
  -6,146
  -6,513
  -6,895
  -7,293
  -7,708
  -8,142
  -8,596
  -9,069
  -9,564
  -10,082
  -10,624
New CAPEX, $m
  -2,069
  -2,240
  -2,356
  -2,469
  -2,582
  -2,695
  -2,809
  -2,924
  -3,041
  -3,161
  -3,285
  -3,414
  -3,548
  -3,688
  -3,834
  -3,988
  -4,150
  -4,320
  -4,499
  -4,688
  -4,888
  -5,098
  -5,320
  -5,554
  -5,801
  -6,062
  -6,337
  -6,627
  -6,932
  -7,254
Cash from investing activities, $m
  -3,444
  -3,777
  -4,068
  -4,365
  -4,671
  -4,986
  -5,310
  -5,644
  -5,990
  -6,347
  -6,718
  -7,104
  -7,505
  -7,922
  -8,356
  -8,810
  -9,283
  -9,777
  -10,294
  -10,834
  -11,401
  -11,993
  -12,613
  -13,262
  -13,943
  -14,658
  -15,406
  -16,191
  -17,014
  -17,878
Free cash flow, $m
  2,037
  2,290
  2,615
  2,959
  3,322
  3,705
  4,106
  4,526
  4,965
  5,422
  5,898
  6,394
  6,909
  7,445
  8,002
  8,581
  9,183
  9,810
  10,462
  11,141
  11,849
  12,586
  13,355
  14,158
  14,995
  15,870
  16,785
  17,740
  18,740
  19,786
Issuance/(repayment) of debt, $m
  3,073
  3,262
  3,430
  3,596
  3,760
  3,924
  4,090
  4,257
  4,428
  4,603
  4,784
  4,971
  5,166
  5,370
  5,583
  5,807
  6,042
  6,290
  6,551
  6,827
  7,117
  7,423
  7,747
  8,088
  8,447
  8,827
  9,227
  9,649
  10,094
  10,562
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  3,073
  3,262
  3,430
  3,596
  3,760
  3,924
  4,090
  4,257
  4,428
  4,603
  4,784
  4,971
  5,166
  5,370
  5,583
  5,807
  6,042
  6,290
  6,551
  6,827
  7,117
  7,423
  7,747
  8,088
  8,447
  8,827
  9,227
  9,649
  10,094
  10,562
Total cash flow (excl. dividends), $m
  5,110
  5,553
  6,045
  6,554
  7,082
  7,629
  8,196
  8,783
  9,393
  10,025
  10,682
  11,365
  12,075
  12,815
  13,585
  14,388
  15,226
  16,100
  17,013
  17,968
  18,966
  20,010
  21,102
  22,245
  23,443
  24,697
  26,012
  27,389
  28,834
  30,348
Retained Cash Flow (-), $m
  -1,323
  -1,378
  -1,449
  -1,519
  -1,589
  -1,658
  -1,728
  -1,799
  -1,871
  -1,945
  -2,021
  -2,100
  -2,183
  -2,269
  -2,359
  -2,453
  -2,553
  -2,657
  -2,768
  -2,884
  -3,007
  -3,136
  -3,273
  -3,417
  -3,569
  -3,729
  -3,898
  -4,076
  -4,264
  -4,462
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  3,787
  4,175
  4,596
  5,035
  5,494
  5,971
  6,468
  6,985
  7,522
  8,081
  8,661
  9,265
  9,893
  10,546
  11,226
  11,935
  12,673
  13,443
  14,246
  15,084
  15,959
  16,873
  17,829
  18,829
  19,874
  20,968
  22,113
  23,313
  24,569
  25,886
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  3,631
  3,822
  3,999
  4,146
  4,258
  4,334
  4,370
  4,366
  4,321
  4,236
  4,113
  3,954
  3,761
  3,540
  3,296
  3,033
  2,757
  2,476
  2,193
  1,917
  1,651
  1,400
  1,169
  959
  773
  612
  475
  361
  268
  195
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Costco Wholesale Corporation is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, Spain, and through its subsidiaries in Taiwan and Korea. As of August 28, 2016, the Company operated 715 warehouses across the world. The Company's average warehouse space is approximately 144,000 square feet. The Company's warehouses on average operate on a seven-day, 70-hour week. The Company offers merchandise in various categories, which include foods (including dry foods, packaged foods and groceries); sundries (including snack foods, candy, alcoholic and nonalcoholic beverages, and cleaning supplies); hardlines (including appliances, electronics, health and beauty aids, hardware, and garden and patio); fresh foods (including meat, produce, deli and bakery); softlines (including apparel and small appliances), and other (including gas stations and pharmacy).

FINANCIAL RATIOS  of  Costco Wholesale (COST)

Valuation Ratios
P/E Ratio 38.2
Price to Sales 0.8
Price to Book 9.5
Price to Tangible Book
Price to Cash Flow 15.2
Price to Free Cash Flow 24.2
Growth Rates
Sales Growth Rate 8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5.5%
Cap. Spend. - 3 Yr. Gr. Rate 4.7%
Financial Strength
Quick Ratio 67
Current Ratio 0
LT Debt to Equity 61%
Total Debt to Equity 61.8%
Interest Coverage 32
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 15.3%
Ret/ On T. Cap. - 3 Yr. Avg. 14.2%
Return On Equity 23.4%
Return On Equity - 3 Yr. Avg. 21.6%
Asset Turnover 3.7
Profitability Ratios
Gross Margin 13.3%
Gross Margin - 3 Yr. Avg. 13.2%
EBITDA Margin 4.3%
EBITDA Margin - 3 Yr. Avg. 4.2%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin 3.1%
Pre-Tax Margin - 3 Yr. Avg. 3.1%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 2%
Effective Tax Rate 32.8%
Eff/ Tax Rate - 3 Yr. Avg. 33.4%
Payout Ratio 145.7%

COST stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the COST stock intrinsic value calculation we used $129025 million for the last fiscal year's total revenue generated by Costco Wholesale. The default revenue input number comes from 0001 income statement of Costco Wholesale. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our COST stock valuation model: a) initial revenue growth rate of 12.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for COST is calculated based on our internal credit rating of Costco Wholesale, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Costco Wholesale.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of COST stock the variable cost ratio is equal to 95.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1415 million in the base year in the intrinsic value calculation for COST stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Costco Wholesale.

Corporate tax rate of 27% is the nominal tax rate for Costco Wholesale. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the COST stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for COST are equal to 13.6%.

Life of production assets of 12.8 years is the average useful life of capital assets used in Costco Wholesale operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for COST is equal to -4.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $10778 million for Costco Wholesale - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 438.82 million for Costco Wholesale is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Costco Wholesale at the current share price and the inputted number of shares is $102.6 billion.

RELATED COMPANIES Price Int.Val. Rating
PSMT PriceSmart 85.30 35.07  str.sell
WMT Walmart 95.75 83.10  hold
TGT Target 87.38 93.27  hold
BIG Big Lots 41.42 136.57  str.buy
FIVE Five Below 126.56 100.91  hold
EBAY eBay 34.24 54.88  str.buy

COMPANY NEWS

▶ Have Analysts Become Too Bearish on Costco Stock?   [Sep-20-18 01:56PM  InvestorPlace]
▶ Why Costcos Bull Run Will End Soon: Piper Jaffray   [Sep-19-18 06:00AM  Investopedia]
▶ Better Buy: Costco Wholesale Corporation vs. Target   [Sep-18-18 06:43AM  Motley Fool]
▶ Costcos Big Run Raises Valuation Worries   [Sep-17-18 03:27PM  Barrons.com]
▶ 7 Wide-Moat Stocks to Avoid--For Now   [Sep-15-18 06:00AM  Morningstar]
▶ 5 Defensive Retail Companies Gurus Agree On   [Sep-14-18 04:56PM  GuruFocus.com]
▶ Wells Fargo downgrades Costco   [11:36AM  CNBC Videos]
▶ Top Stock Reports for Merck, PepsiCo & 3M   [Sep-11-18 10:39AM  Zacks]
▶ Costco Wholesale Is the Real Walmart Killer   [Sep-10-18 10:59PM  InvestorPlace]
▶ Nasdaq Tries To End Losing Streak; Retail Stocks Strong   [Sep-07-18 12:20PM  Investor's Business Daily]
▶ Costco August sales rise 12% to $11 billion   [Sep-06-18 04:41PM  MarketWatch]
▶ Fintech Varo Money gets preliminary approval to start first mobile-only national bank   [Sep-04-18 05:33PM  American City Business Journals]
▶ 7 Stocks to Buy In Case This Bull Market Stalls   [Aug-29-18 01:26PM  Kiplinger]
▶ 5 Companies Hit 52-Week Highs   [12:13PM  GuruFocus.com]
▶ Why the Rally in Walmart Stock Is Fading   [Aug-28-18 04:50PM  InvestorPlace]
▶ 3 Retailer Stocks You Don't Have to Babysit   [Aug-26-18 11:43AM  Motley Fool]
▶ Patti Payne: Two events bring in $14 million for charity   [Aug-23-18 07:00PM  American City Business Journals]
▶ Retail Funds Break Out to All-Time Highs   [09:55AM  Investopedia]
▶ Analysts Raise Costco Price Target   [12:00PM  GuruFocus.com]
▶ Will On-Demand Meal Kits Save Blue Apron?   [Aug-21-18 11:10PM  Motley Fool]
▶ 4 Reasons to Like Costco's Dividend   [07:31PM  Motley Fool]
▶ The Biggest Reason Costco Stock Is a Buy   [01:21PM  InvestorPlace]
▶ 3 Great Stocks for Low-Risk Investors   [Aug-18-18 10:17AM  Motley Fool]
▶ Blue Apron Still Won't Admit It Has a Retention Problem   [Aug-15-18 11:30AM  Motley Fool]
▶ Is Blue Apron a Value Play or a Falling Knife?   [Aug-11-18 07:15AM  Motley Fool]
▶ Organic dairy farmers vow to compete in changing industry   [Aug-09-18 12:30PM  Associated Press]
▶ Should Charlie Munger Buy More Costco Stock?   [06:30AM  InvestorPlace]
▶ Costco Wholesale Corporation Reports July Sales Results   [Aug-08-18 04:15PM  GlobeNewswire]
▶ Why Costco Stock May See a Big Pullback   [11:30AM  Investopedia]
▶ Avoid Gildan Stock Despite Its Post-Earnings Surge   [Aug-03-18 11:24AM  InvestorPlace]
▶ 5 things to know, and the opening date for Costco in Elk Grove   [11:12AM  American City Business Journals]
▶ Wage Growth Was The Soft Spot In The July Jobs Report   [10:44AM  Investor's Business Daily]
▶ Go Long Costco Stock: No Membership Required   [Aug-01-18 10:52AM  TheStreet.com]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.