As Costco Wholesale Corporation (NASDAQ:COST) announced its earnings release on 02 September 2018, it seems that analyst forecasts are fairly in-line with its track record, as upcoming earnings growth is expected to be 8.9% next year, similar to the range of average earnings growth for the past five years of 8.6% per year. Presently, with latest-twelve-month earnings at US$3.1b, we should see this growing to US$3.4b by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Costco Wholesale

What can we expect from Costco Wholesale in the longer term?

Longer term expectations from the 24 analysts covering COST’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of COST’s earnings growth over these next few years.

From the current net income level of US$3.1b and the final forecast of US$4.1b by 2021, the annual rate of growth for COST’s earnings is 9.3%. This leads to an EPS of $9.28 in the final year of projections relative to the current EPS of $7.15. The main reason for growth is a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. With a current profit margin of 2.2%, this movement will result in a margin of 2.3% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Costco Wholesale, I’ve put together three essential factors you should look at:

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

2. Valuation: What is Costco Wholesale worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Costco Wholesale is currently mispriced by the market.

3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Costco Wholesale? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.