Key Points
Given its durable demand, massive scale, and consistent profit growth, Costco is a high-quality business.
Value-focused investors may hesitate to buy shares due to the steep price-to-earnings ratio.
Over the past 10 years, Costco (NASDAQ: COST) shares have climbed sixfold (as of Oct. 2). This has been an exceptional investment. That's true even though the retail stock trades 16% off its peak.
Is Costco a smart buy with $1,000 in October?
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There's no question that this is a high-quality business. Costco's warehouses see durable demand, as indicated by steady same-store sales growth. The company's massive size, with net sales totaling $297 billion in fiscal 2026 (ended Aug. 30), gives it a scale that supports a cost advantage, keeping prices low for shoppers.
Furthermore, the profitability streak is impressive. Costco consistently increases its earnings stream. Net income rose at a solid compound annual rate of 14.7% in the past decade.
The business continues to open new warehouses around the globe, which will drive future revenue and profit gains. At its current size, though, it's reasonable to assume that the growth will normalize. Plus, competition in the retail sector is always fierce.
Investors who haven't already should add Costco to their watch lists for now. It's not a screaming buy because the valuation is steep, with shares trading at a price-to-earnings ratio of 44.3. Market participants who favor quality over price, however, will have no issue adding the company to their portfolios.
But I believe that being patient is the best move right now.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.