Aim of this article is to make an estimate regarding the prospective movements in price of Costco's wholesale corp. stock news, cost stocks and its cost which would help investors in their assessments of the stock.
An Introduction to Costco:
Costco Wholesale Corp. (COST) is the one of the largest retailer in USA and the world, currently placed at 4th position, with a cost estimate $51 billion market capitalization.
Averaging around 143,000 warehouses, Costco Wholesale Corporation operates an international network of warehouse clubs on membership basis, employing 185,000 employees worldwide in the process.
Additionally, a division of Costco wholesale corp., Costco Wholesale Industries, operates as a manufacturing division; including packaging of special food, optical labs, processing meat, and distributing jewelry. All these businesses aim at providing members with high quality at significantly cheaper cost prices.
A lot of factors affect the industry in which Costco operates being price, services to member, quality of goods and the location of the warehouses. Costco has stretched out on nationally as well as internationally in terms of wholesalers and retailers which include super markets, online retailers, stores, petrol or gas stations and departmental stores.
Costco has made available various products that the customers have a need of daily or weekly, thereby ensuring repetitive purchases and visits. From gas, discretionary capital expenditures such as TV, refrigerator, books, clothes to food supplies and staples.
The major merchandise stores or retail competitors of Costco include Wal-Mart, Amazon, Target and Kohl.
Other competitors include many operators who deal in only single-category merchandise or limited range product base, examples being Whole Foods, Home Depot, PetSmart, OfficeDepot, Trader Joe's, Walgreen, Best Buy, Lowe's, Kroger and CVS.
Forces and Trends affecting the company:
While US economy is still in the process of recovering and bringing up the levels of consumer spending, it might still be restricted from improving because of the deleveraging. While customers are aware of the prices and are conscious of low price availability, the competitors too can negatively contribute towards the bringing down of the industry margins in future.
Company Performance, Operational and Financial Analysis:
If we look at the last 12 months performances, the company was seen to have underperformed against the industry averages, with profit margins falling from 4.51% to 1.95%. The Return on Asset was 6.72%, with a growth rate of 7.73% and equity return of 17.15% which is inferior to the respective industry averages of 8.78%, 9.87% and 18.81%.
The company has however been producing consistently positive results and the company’s price to sale ratio is much better than the industry being 0.49 as against 1.12. Current ratio just edged past the industry by 0.07% being 1.17%, and asset...