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How Does Costco Compare to Its Peers?

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Costco and its peers

An analysis of Costco’s income statement in 4Q15 follows:

  • The net profit margins of Costco (COST), Walmart (WMT), Target (TGT), Big Lots (BIG), and PriceSmart (PSMT) are 2.19%, 3.02%, 4.44%, 1.46%, and 3.03%, respectively.
  • The EPS (earnings per share) of Costco, Walmart, Target, Big Lots, and PriceSmart are $1.73, $1.08, $1.21, $0.34, and $0.70, respectively.

An analysis of Costco’s balance sheet in 4Q15 follows:

  • The current ratios of Costco, Walmart, Target, Big Lots, and PriceSmart are 1.04, 0.89, 1.15, 1.73, and 1.34, respectively.

An analysis of Costco’s valuation follows:

  • The PE (price-to-earnings) ratios of Costco, Walmart, Target, Big Lots, and PriceSmart are 27.59x, 13.34x, 17.25x, 17.88x, and 26.25x, respectively.
  • The PBV (price-to-book value) ratios of Costco, Walmart, Target, Big Lots, and PriceSmart are 5.97x, 2.60x, 3.56x, 3.76x, and 3.99x, respectively.

According to the above findings, the peers outperformed Costco based on the net profit margin and current ratio. However, Costco is way ahead of its peers based on the EPS, PE ratio, and PBV ratio.

ETFs that invest in Costco

The VanEck Vectors Retail ETF (RTH) invests 5.09% of its holdings in Costco. RTH tracks a market-cap-weighted index of the 25 largest US-listed companies that derive most of their revenue from retail.

The PowerShares Dynamic Retail ETF (PMR) invests 4.99% of its holdings in Costco. PMR tracks a multifactor, tiered, and equal-weighted index of US retail stocks.

The Consumer Staples Select Sector SPDR Fund (XLP) invests 3.80% of its holdings in Costco. XLP tracks a market-cap-weighted index of consumer staples stocks drawn from the S&P 500.

Comparing Costco and its ETFs

An analysis of Costco’s price movement follows:

  • The YTD (year-to-date) price movements of Costco, RTH, PMR, and XLP are 5.58%, 1.41%, -6.37%, and -1.71%, respectively.

An analysis of Costco’s valuation follows:

  • The PE ratios of Costco, RTH, PMR, and XLP are 27.59x, 26.20x, 22.05x, and 23.54x, respectively.
  • The PBV ratios of Costco, RTH, PMR, and XLP are 5.97x, 5.46x, 4.79x, and 5.76x, respectively.

According to the above findings, Costco outperformed its ETFs based on the price movement, PE ratio, and PBV ratio.

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