On the heels of a 9.7% growth in same-store sales for June, analysts have raised their ratings and targets on Costco Wholesale Corp. (COST, Financial).
Loop Capital raised its price target on Costco to $235 per share. Previously, Loop Capital had a $224 price target on Costco.
The price target represents the highest of a range, which is defined by 26 estimates. The lowest price target is $186 per share. Loop Capital signals the stock is a 'Buy.'
Analysts at JPMorgan also increased its target by 7.1% from a previous $212 per share to a new price of $227 per share.
Wells Fargo has maintained an ‘Outperform’ rating and set a price target of $235 per share.
Consumer Edge Research also kept its previous rating of ‘Overweight’. For the analyst the share price of Costco will hit $220 within the following 52 weeks of trading.
Following the report on June sales, the stock closed 14% up to $214.02 on Thursday. So far this year, Costco gained 14% and outperformed the S&P 500 index by 10%.
The 52-week range is of $150 to $214.17 per share. The stock in Costco Wholesale Corp. has a market capitalization of $93.86 billion.
Some indicators on the stock’s attractiveness show that Costco has paid dividends over 15 years. The company is dispersing its free cash flow to the shareholders based on a cash quarterly dividend of 57 cents. The remuneration for the shareholder leads to a forward annual dividend of $2.28 per share, yielding 1.08%.
The issuance of dividends is based on a solid balance sheet that GuruFocus rates with a score of 7 out of a total of 10 in terms of financial strength. It is based on operations, which have guaranteed a high profitability compared to most peers. GuruFocus ranks Costco’s past profitability and growth with a rating of 7 of 10.
Analysts foresee a nearly 9% growth in earnings to $7.70 per share in fiscal 2019 and a nearly 12% growth in each of the fiscals in the next five years. The S&P 500 is expected to grow its earnings at an annual rate of no more than 0.11%.
Valuation
The new estimates on Costco’s price target will raise the average to close to $217.54 per share, which represents 1.65% from the current market valuation. Added to the forward dividend yield, the expected stock appreciation leads to a one-year return of approximately 2.73%, which is nearly 0.4 percentage points higher than the one-year yield on U.S. Treasury securities.
Costco Wholesale Corp. has a forward price-earnings ratio of 27.4 times. When the price-earnings ratio is multiplied by an earnings per share of $7.55, it yields a value of $206.87 per share. This value is slightly below the current market valuation, which may indicate a non-compelling share price. Therefore, I would wait for a retreat to the 50-SMA line value of $202.60 before acquiring shares of Costco.
Other information about the stock indicates that the company is reporting 438.6 million shares outstanding, of which 74.35% is held by institutions and 0.52% is held by insiders.
The most prominent holders of the stock in Costco Wholesale Corp. are State Street Corp. with 3.94% of shares outstanding, Capital Research Global Investors with 2.87% stake and Wellington Management Group with 2.87% ordinary shares. Figures on holdings are as of March 31.
(Disclosure: I have no positions in any security mentioned in this article.)
