I’ve been watching Costco (NASDAQ: COST) for a long time, waiting for the right opportunity to buy in. Costco is one of the most popular retailers in the world, built on a membership-based warehouse model where customers pay annual fees for access to bulk groceries, household items, and more. This membership structure not only provides steady revenue but also builds customer loyalty.
But when I look at Costco’s stock right now, I’m not convinced it’s the best move for me. Here’s why.
Recent Stock Performance
In the short term, Costco hasn’t exactly been a standout:
- Today: down 0.35%
- Past 3 months: down 2.18%
- Past 6 months: down 9%
- Year to date: up 7.2%
- Past year: up 13%
Now, compare that to the S&P 500:
- 6 months: up 5.8%
- Year to date: up 10%
- Past year: up 18.6%
- Past 5 years: up 91.8%
Costco has crushed the S&P over 5 years (up nearly 190%), but more recently, the index has outperformed. To me, that’s a red flag if I’m thinking of buying Costco at today’s price.
Earnings & Fundamentals
Costco’s recent Q2 2025 results looked strong on the surface:
- Revenue up 8% year-over-year
- Earnings per share (EPS) up 13%
- Membership income up 10.4%
They also beat on EPS and revenue in their May earnings call, though only slightly. Still, growth is consistent, if not spectacular.
Looking deeper:
- Dividend yield: just 0.5% (not meaningful if you’re seeking income)
- Return on capital: 18.3% (solid)
- PE ratio: ~55 (very high for a retailer)
- EV/EBITDA: 32.9 (also elevated)
- PEG ratio: 6.09 — a major concern, since anything above 2 is usually considered overvalued
The PEG ratio, in particular, screams that Costco may be overpriced relative to its growth potential.
Insider & Institutional Sentiment
When I see insiders and hedge funds selling more than they’re buying, I take notice. In Q1 2025, about 81% of hedge fund activity was selling Costco. Insiders have also been offloading shares in recent months.
Meanwhile, analysts are split:
- Buy: 53.8%
- Hold: 43.6%
- Sell: 2.6%
Basically, Wall Street isn’t overly bullish here.
Company Culture & Management
One positive I’ll give Costco is that it seems to be a well-run company. Employees give it a 3.9/5 rating, with 73% recommending it to a friend and 76% approving of the CEO. For me, company culture and leadership matter, and Costco scores well here.
Where the Growth Will Come From
Unlike a tech company chasing “moonshots,” Costco’s growth plan is straightforward:
- Open more warehouses
- Expand digital offerings
- Keep customers renewing memberships
This isn’t necessarily bad—it’s steady and reliable—but it doesn’t offer the kind of big upside potential that would justify its current valuation, in my opinion.
My Verdict
I know I’ve been giving a lot of “hold” ratings lately, but Costco is actually a sell for me right now. As much as I’d like to own it, I think the stock is too expensive at its current levels.
With such a high PE and PEG ratio, low dividend yield, and limited near-term growth catalysts, I don’t see Costco outperforming the S&P 500 going forward. Personally, I’d rather just put that money into the S&P itself.
If Costco corrects in price, I’d revisit it. But for now, I’m staying on the sidelines.
(This is not financial advice — just my personal opinion and analysis.)