Wal-Mart ( WMT) may be the world's largest retailer, but in terms of the stock market, Costco ( COST) has emerged as lord of the discounters. Shares of Costco have climbed 16.2% since the beginning of 2005. During that span, rival warehouse retailer B.J.'s Wholesale Club ( BJ) added 7%, while Target ( TGT) rose 6% and Wal-Mart dropped 12%. Strong same-store sales gains, growth opportunities, labor harmony and an impeccable reputation for execution have all lent momentum to Costco. Amid speculation that the Seattle-based warehouse chain will soon raise its membership fees, shares hit a five-year intraday high Tuesday of $54.70. Now, some observers are wondering if the company's valuation has gotten too big for its britches. "I'm not disputing that Costco is a great company," says HSBC analyst Mark Husson, who is one of two analysts out of 24 on Wall Street who holds a negative rating on the stock (his firm has an investment banking relationship with Costco). "I just think the stock has gotten too expensive considering the risks that it's facing." At over $54, shares of Costco are trading at more than 20 times its earnings estimates through 2007. That's a hefty premium compared with Wal-Mart, which trades at less than 14 times estimates. B.J.'s trades at just over 14 times estimates, and Target trades at about 15 times projections. As the largest U.S. warehouse club chain, Costco competes most directly with Wal-Mart's Sam's Club chain, which posted a 5.1% same-store sales rise over its previous four quarters, compared with Costco's 7.5% gain. B.J.'s logged a 4.1% increase in that span. Same-store sales, or comps, is a key performance gauge in retailing, measuring sales at stores open for at least a year. "Costco's stock is starting to get pricey, but I think it definitely deserves a premium over Wal-Mart since it's one of the few retailers out there that competes head-on with them and, quite frankly, beats the pants off them," says Morningstar analyst Anthony Chukumba. "They're incredible merchants. Their customer service is pretty much the best out there in all of retail. They treat their employees better. They pay them more. Their benefits are better, and the company still has room to grow both at home and abroad."