Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of A+ . The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.
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Highlights from the ratings report include:
- COSTCO WHOLESALE CORP has improved earnings per share by 20.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COSTCO WHOLESALE CORP increased its bottom line by earning $3.31 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($3.87 versus $3.31).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food & Staples Retailing industry average. The net income increased by 19.1% when compared to the same quarter one year prior, going from $324.00 million to $386.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.7%. Since the same quarter one year prior, revenues slightly increased by 8.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $1,083.00 million or 33.53% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -9.79%.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 28.40% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
Costco Wholesale Corporation operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. The company has a P/E ratio of 26.8, above the average retail industry P/E ratio of 26.6 and above the S&P 500 P/E ratio of 17.7. Costco Wholesale has a market cap of $41.35 billion and is part of the
industry. Shares are up 15.4% year to date as of the close of trading on Tuesday.
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--Written by a member of TheStreet Ratings Staff.