Better Growth Stock: Costco vs. Visa

Key Points

• Costco is a retailer with an incredible history of growth.

• Visa is a payment processor that's grown at a rapid clip.

• Both stocks are expensive, but one looks a bit more pricey than the other.

• 10 stocks we like better than Visa ›

Consumers can use a Visa (NYSE: V) card to shop at warehouse club retailer Costco (NASDAQ: COST), but should investors buy either one of these growth stocks? The answer isn't exactly clear-cut.

Some investors shouldn't own either stock. Here's why one of these two well-known stocks is probably a better buy than the other.

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What do Visa and Costco do?

Visa is a payment processor, which puts it in the financial sector. It collects small fees for facilitating financial transactions via cards that are emblazoned with its logo.

Although any individual fee from a single transaction is small, the company handles a tremendous number of transactions. As a result, the small fees add up to big money. In the second quarter of 2025, Visa processed 60.7 billion transactions, up 9% year over year, leading to a revenue increase of 9% to $9.6 billion.

Image source: Getty Images.

Costco is a warehouse club store, which happens to issue a credit card in the Visa system. Unlike with a traditional retailer, Costco customers pay an annual fee to shop at the company's stores. This fee is like an annuity, given the roughly 90% customer renewal rate.

Membership fees end up accounting for about half of the company's operating income because there's little cost associated with them. In the fiscal third quarter of 2025, Costco's revenue jumped 8% to nearly $62 billion.

Both Visa and Costco are well-run businesses. Notably, investors have many reasons to believe that both will continue to be strong performers.

Visa, for example, is likely to continue benefiting from the shift toward digital transactions and card payments. Costco, meanwhile, continues to expand its store base, thanks to strong demand at existing locations.

The problem with Visa and Costco

There's one very important issue to monitor with both Visa and Costco, however, and that's valuation. Growth stocks are often afforded a premium price tag, so this isn't shocking, but it also shouldn't be ignored.

If you're a value investor, you likely won't want to own either of these stocks. Visa pays a dividend that yields a paltry 0.7% while Costco yields less than 0.6%.

How expensive are these stocks? Visa's price-to-sales (P/S), price-to-earnings (P/E), and price-to-book (P/B) value ratios are all above their five-year averages. Costco's P/S, P/E, and P/B ratios are also all above their five-year averages.

That said, going with the most common valuation metric, price-to-earnings, Visa's current P/E is about 5% above its five-year average. That compares to 25% or so for Costco. If you have to pick one of these two growth stocks, the better "value" looks like it's Visa right now.

Tread carefully with Visa and Costco

Both are well-managed businesses likely to continue growing over time. They're also rather expensive right now, but Visa is the less pricey of the two. That will probably make it the better option for most growth investors.

Still, investors need to go in with some caution, because an economic slowdown or a recession would likely be a negative for both companies. For less aggressive investors, putting Visa and Costco on a wish list might make the most sense. That way, when a recession eventually comes along, you'll have the fortitude to buy while others are selling these two growth stocks.

Should you invest $1,000 in Visa right now?

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Visa. The Motley Fool has a disclosure policy.