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Today I will take a look at Costco Wholesale Corporation's (NASDAQ:COST) most recent earnings update (12 May 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the consumer retailing industry performed. As an investor, I find it beneficial to assess COST’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did COST's recent earnings growth beat the long-term trend and the industry?
COST's trailing twelve-month earnings (from 12 May 2019) of US$3.6b has jumped 20% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 11%, indicating the rate at which COST is growing has accelerated. How has it been able to do this? Let's see whether it is only attributable to an industry uplift, or if Costco Wholesale has experienced some company-specific growth.
In terms of returns from investment, Costco Wholesale has invested its equity funds well leading to a 25% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.3% exceeds the US Consumer Retailing industry of 5.5%, indicating Costco Wholesale has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Costco Wholesale’s debt level, has increased over the past 3 years from 22% to 23%.
What does this mean?
Costco Wholesale's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Costco Wholesale has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Costco Wholesale to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for COST’s future growth? Take a look at our free research report of analyst consensus for COST’s outlook.
- Financial Health: Are COST’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 12 May 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.