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 3.4%. 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 ($4.54 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.
- Powered by its strong earnings growth of 37.77% and other important driving factors, this stock has surged by 25.03% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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 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 $47.6 billion and is part of the services sector and retail industry. The company has a P/E ratio of 24.00, above the S&P 500 P/E ratio of 18.00. Shares are up 10.5% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.
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