Is Costco Stock Worth Buying at Current Prices? A Reality Check

Costco (NASDAQ: COST) pulled in $270 billion in sales last fiscal year and has crushed returns — up 159% over five years. But here’s the thing: shares are sitting at a 17% discount from their peak, which is making people itchy to buy. Before you throw money at it, know what you’re actually getting into.

The Secret Sauce: Membership Isn’t Just a Fee

Unlike your typical retailer, Costco’s real money pit isn’t the warehouse goods — it’s the membership model. With 81 million membership households globally (up 6.3% YoY), customers fork out $65/year just to walk through the door. This creates a psychological lock-in: once you’ve paid, you want to shop there to justify the cost.

The kicker? A ~90% global renewal rate. That’s customer loyalty that competitors can only dream of. It’s not about best prices alone; it’s about making members feel they need to be there.

Sales Growth Keeps Firing

Same-store sales (SSS) jumped 5.9% in fiscal 2025, keeping alive a streak of consistent growth regardless of economic headwinds. Whether inflation is raging or recession fears spike, Costco’s “high-quality, lowest prices” strategy keeps customers coming back. Translation: this is a defensive play in uncertain markets.

The Valuation Elephant in the Room

Here’s where it gets dicey. Costco trades at a P/E of 49.2 — yeah, that’s expensive. Sure, the company has earned a premium multiple over years of solid execution, but there’s no margin of safety here. Market enthusiasm can turn, and as Costco matures, that P/E multiple could compress hard. You’re basically betting the company stays perfect forever.

The Bottom Line: Costco is genuinely a strong business, but the price tag leaves little room for error. Ask yourself: is paying 49x earnings worth the safety of their model? Right now, that’s a tough sell.