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 revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- COST's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 8.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- COSTCO WHOLESALE CORP has improved earnings per share by 37.8% 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 $3.90 versus $3.31 in the prior year. This year, the market expects an improvement in earnings ($4.53 versus $3.90).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 38.8% when compared to the same quarter one year prior, rising from $394.00 million to $547.00 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food & Staples Retailing industry and the overall market, COSTCO WHOLESALE CORP's return on equity exceeds that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
Costco Wholesale Corporation engages in the operation of membership warehouses. The company offers branded and private-label products in a range of merchandise categories. Costco Wholesale has a market cap of $46.24 billion and is part of the services sector and retail industry. The company has a P/E ratio of 23.8, above the S&P 500 P/E ratio of 17.7. Shares are up 7.3% year to date as of the close of trading on Wednesday.
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--Written by a member of TheStreet Ratings Staff.
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