The Costco Wholesale Corporation (NASDAQ: COST) is growing and adding value during a pandemic.
Costco’s revenues grew by 14.58% in the quarter ending on 28 February 2021 and 16.65% in the quarter ending on 30 November 2020, Stockrow estimates. The revenue growth rate rose from 10.39% in the quarter ending on 29 February 2020, the period just before the COVID-19 pandemic began.
Similarly, Costco’s quarterly gross profit rose from $5.016 billion on 29 February 2020 to $5.691 billion on 28 February 2021. Meanwhile, the quarterly operating income rose from $1.266 billion on 29 February 2020 to $1.340 billion on 28 February 2021.
Overall, Costco’s quarterly revenues grew from $39.072 billion on 29 February 2020 to $44.769 billion on 28 February 2021. Costco (COST) is growing and making more money during a pandemic.
The Costco Ecosystem Grows
One reason I admire Costco (NASDAQ: COST) is the club store operator’s growing ecosystem.
For instance, the number of Costco cardholders worldwide grew from 98.5 million in 2019 to 105.5 million in 2020, Statista estimates. Costco makes money from cardholders because ti charges $60 for regular memberships and $120 for Gold Star Executive memberships.
Statista estimates Costco was the sixth-most valuable retail brand in the world in 2020 with an approximate brand value of $28.7 billion. In contrast, the most valuable retail brand in the world is Amazon (AMZN) with an estimated brand value of $415.855 billion in 2020.
The most valuable brick and mortar retailer in the United States is Home Depot (HD) with an estimated 2020 brand value of $57.585 billion. Statista estimates Costco’s closest American competitor Walmart (WMT) had a 2020 brand value of $45.783 billion.
I think Statista’s data shows Costco’s brand value is small in comparison to Walmart and Amazon. However, Costco is a growing company that generates enormous amounts of cash.
How Much Cash does Costco estimate?
There are some worrisome financial numbers at Costco (COST). For instance, the quarterly operating cash flow fell from $619 million on 29 February 2020 to $38 million on 28 February 2021.
Moreover, Costco’s quarterly ending cash flow fell from $13.59 billion on 30 November 2020 to -$4.953 billion on 28 February 2021. Costco began 2020 with a negative quarterly ending cash flow of -$1.241 billion on 29 February 2020.
On the other hand, Costco pays off enormous amounts of debt. For instance, Costco reported a negative quarterly ending cash flow of -$4.65 billion on 29 February 2021. Costco began 2020 with a negative quarterly financing cash flow of -$1.392 billion.
In 2020, Costco’s total debt grew from $5.559 billion on 29 February 2020 to $7.617 billion on 28 February 2021. I think Costco took on debt to survive coronavirus.
What Value does Costco Have?
Costco (COST) added value in 2020. Costco began 2020 with $48.782 billion in total assets on 29 February 2020.
The total assets grew to $54.918 billion on 28 February 2020. Costco’s Total Assets have fallen, the company reported $60.217 billion in total assets on 30 November 2020.
In addition, Costco’s cash and short-term investments grew from $8.715 billion on 29 February 2020 to $9.254 billion on 28 February 2021. The cash and short-term investments rose to $14.423 billion on 30 November 2020.
Thus, Costco added value during a pandemic. However, Costco is already losing value as the pandemic winds down.
Does Mr. Market Overvalue Costco?
I think Mr. Market overvalued the Costco Wholesale Corp (COST) at $362.48 on 6 April 2021.
Conversely, I consider Costco an excellent stock that makes money and retains value. Hence, you will pay too much for Costco, but you will not lose money from it.
Costco is capable of enormous share value growth. The Costco share price rose from $288.65 on 3 April 2020 to $354.94 on 1 April 2021. Thus, Costco is a good stock for those who could need to sell the stock soon.
Notably, Costco is still an excellent dividend stock. Costco paid a 70₵ quarterly dividend on 19 February 2021. In addition, Costco paid a $10 special dividend on 11 December 2020.
In total, Costco offered a $2.80 Last Twelve Months (LTM) dividend and a 0.79% dividend yield on 6 April 2021. Dividend.com estimates Costco’s dividend has grown for the last 16 years.
If you are looking for a retail stock that will grow and pay a good dividend. I consider Costco an excellent choice. In my opinion, Costco is still the best widows’ and orphans’ stock in the retail sector because it offers a high margin of safety.
Originally published at https://marketmadhouse.com on April 5, 2021.