Costco Is One of the Largest Consumer Goods Companies by Market Cap. But Is It a Buy?

Key Points

• Costco has been a top performer in the consumer goods sector in recent years.

• The company has a number of a valuable competitive advantages.

• Its valuation has gotten stretched, putting pressure on the stock.

• 10 stocks we like better than Costco Wholesale ›

Costco Wholesale (NASDAQ: COST) is one of the top consumer goods stocks on the stock market.

Since its IPO, the stock is up more than 4,000%, and Costco has been about as consistent a performer as they come in the sector as it benefits from a number of competitive advantages.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

First, Costco is more resilient to economic downturns than the typical big-box chain. Most of Costco's revenue comes from groceries, a recession-proof category as consumers need to eat regardless of the state of the economy. Additionally, its membership-based business model makes the business more stable than a typical retailer since its members have already paid a fee to shop there, and they're likely to want to take advantage of that and Costco's low prices. Finally, Costco also caters to a higher-income demographic because of its membership fees, and those consumers are less likely to change their behavior, even with the impact of a recession.

While other retailers have struggled lately due to weak consumer discretionary spending and pressure related to tariffs, trade wars, and economic uncertainty, Costco has been unfazed.

Through the first 36 weeks of the year, the retailer has reported 8.1% adjusted comparable sales growth, which excludes gasoline prices and foreign exchange. It's also delivered bottom-line growth as well with net income up from $1.68 billion to $1.9 billion.

Those kinds of results explain why Costco is one of the most valuable consumer goods stocks on the market today.

Image source: Getty Images.

Where does Costco rank among consumer goods stocks?

According to research from The Motley Fool, Costco is currently the second-biggest consumer staples company by market cap, ahead of Procter & Gamble and behind Walmart. At a market cap of $436 billion, Costco still has a long way to go to catch Walmart, which currently has a market cap of $779 billion.

Costco's also No. 2 in the category by revenue with $264.1 billion over the last four quarters, well below Walmart's revenue of $681 billion.

However, Costco has outperformed Walmart this century on the stock market, as the chart below shows.

COST data by YCharts

Both stocks have performed well in recent years thanks to their economies of scale and leadership in groceries.

Is Costco a buy?

Costco has a lot of things going for it, including the competitive advantages listed above, which continue to drive the company's growth and market share gains. Costco is also still opening stores, separating it from competitors like Walmart, which has stopped opening stores. Walmart is instead investing in e-commerce, infrastructure, and technology.

Costco still has fewer than 1,000 warehouses around the world and operates in a number of countries besides the U.S., meaning it still has a long runway for new store growth, especially as its same-store sales growth has been so strong, a reflection of strong demand.

As a business, Costco looks rock-solid, but investors also need to consider the price of a stock in addition to the quality of the business. Costco's valuation has gotten inflated in recent years as the stock has soared.

Its price-to-earnings ratio is now 56, which is more expensive than any of the other biggest consumer goods stocks. It's also significantly above the P/E ratio of the S&P 500 index, which is now trading around 27 times earnings.

Using that broad market index as a comparison, both stocks look expensive, and Costco has actually pulled back nearly 10% from its peak earlier this year. At a more attractive valuation, Costco would be worth buying, but I'd like to see the P/E ratio fall by at least 20% before it enters that range.

Still, the execution in the business has been impeccable lately, and its competitive advantages are clear. Over the long term, Costco still looks well positioned for success.

Should you invest $1,000 in Costco Wholesale right now?

Before you buy stock in Costco Wholesale, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Costco Wholesale wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.