Costco's Stock Is Expensive, But It Could Quickly Go Higher If This Happens
Costco Wholesale (NASDAQ: COST) is one of the largest, most popular retail stocks to own. But investors may be growing concerned that its valuation has gotten too high. At more than $320 billion, its valuation can look pricey as the stock trades at close to 50 times its trailing earnings. Even for fast-growing tech stocks, that can look expensive. In retail, where growth is more modest, it can be much more concerning.
Costco's stock does appear to be losing steam of late, declining by 2% last month. But there's one thing that could quickly send the stock rallying again -- an increase to its membership fees.
A key reason Costco does well is that it relies on membership revenue to boost its margins. Those memberships can help it price items more aggressively, knowing that its margins can be a bit lower and that membership revenue will give its financials a boost.
Source Fool.com
