Costco Has Grown Its Membership Base no Matter What the Economy Has Done. Does That Make It a Forever Hold?
2026-09-05 08:30
•John Ballard •The Motley Fool
•• • Axe Cap view
Costco’s Stronghold: Great Business, But Pricey for Now
Costco’s membership growth is impressive, yet its stock seems expensive compared to history.
Costco has built a rare resilience by growing memberships steadily through recessions, supported by loyalty rates over 90%. This shows a durable competitive moat that many companies strive for. Still, the current stock trades at 47 times trailing earnings, far above its usual 30 times range. That premium prices in high expectations for continued growth; analysts peg earnings growth around 11% annually. For investors, it’s a reminder that strong businesses don't always mean buys at any price. On the JSE, this translates into being cautious about similarly well-positioned retailers or consumer stocks that have rerated aggressively without clear evidence of earnings acceleration. Meanwhile, the USD/ZAR rate will remain a useful risk barometer; a weaker rand inflates the cost of such expensive global equities. Yet if inflation or global shocks depress consumer spending, Costco’s moat might face tests, dragging down shares suddenly. In short, this feels like a ‘wait for a better entry’ story. this is just our opinion and not financial advice
Hold off on Costco for now due to stretched valuation; keep an eye on rand strength as an entry signal. More attractively valued local retailers deserve a closer look in the meantime.
- COST
- USD/ZAR
- slower consumer spending globally hitting Costco membership growth
- rand weakening sharply lifting imported input costs for local retail stocks
6/10
Costco has demonstrated consistent membership growth even during recessions, with renewal rates above 90% and a durable competitive moat. However, the stock trades at a high 47x trailing earnings compared to its historical 30x multiple, making current valuation expensive relative to estimated 11% annual earnings growth. While the business model is solid for long-term investing, investors may want to wait for a lower entry price.
Our take is based on reporting first published by The Motley Fool.
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