Costco (COST) Gains But Lags Market: What You Should Know

Costco (COST) closed at $323.02 in the latest trading session, marking a +0.3% move from the prior day. The stock lagged the S&P 500's daily gain of 0.47%. Meanwhile, the Dow gained 0.4%, and the Nasdaq, a tech-heavy index, added 0.87%.

Prior to today's trading, shares of the warehouse club operator had gained 2.81% over the past month. This has lagged the Retail-Wholesale sector's gain of 3.92% and outpaced the S&P 500's gain of 1.43% in that time.

Investors will be hoping for strength from COST as it approaches its next earnings release, which is expected to be March 5, 2020. On that day, COST is projected to report earnings of $2.06 per share, which would represent year-over-year growth of 2.49%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $38.34 billion, up 8.31% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $8.65 per share and revenue of $162.96 billion. These totals would mark changes of +5.62% and +6.72%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for COST. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.77% higher. COST is currently a Zacks Rank #2 (Buy).

Valuation is also important, so investors should note that COST has a Forward P/E ratio of 37.21 right now. This represents a premium compared to its industry's average Forward P/E of 22.04.

Meanwhile, COST's PEG ratio is currently 4.59. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Retail - Discount Stores was holding an average PEG ratio of 2.05 at yesterday's closing price.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 87, which puts it in the top 35% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.

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