QS Research · Michael Burry's Scion Capital analyst template · 2006
COSTCO WHOLESALE CORP /NEW (COST)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case +12% · downside -10% · upside +20%
Costco is a demonstrably superior retailer and nothing in the operating record argues otherwise: 84.1M paid members at a 92.3% U.S./Canada renewal rate, $15.14B of net cash, and net income up from $5.01B (FY2021) to $9.23B (FY2026) with diluted shares flat at 444.43M versus 444.35M. What is at issue is the price paid for that record: 50.6x P/E and 31.5x EV/EBITDA against WMT at 45.1x/21.6x and TGT at 16.4x/8.8x, on a 2.0% FCF yield and 13.04x book. Holding today's 50.6x P/E and growing FY2026 net income $9.23B by 12% gives $10.34B x 50.6 = $523.1B / 443.13M shares = about $1,180 (+12%); a 10% earnings stumble at the same multiple gives $8.31B x 50.6 = $420.3B / 443.13M = about $948 (-10%); the full peer de-rating to WMT's 21.6x EV/EBITDA is about $734 (-30%), and that tail is why this is not a long. Verdict: watch — a great business with no margin of safety and no non-valuation catalyst to re-rate the multiple; the buy case needs a lower price, not a better story.
Key numbers
- Share price: $1,053.56
- Market cap: $466.86B
- Latest financial period: FY Aug 2026 to Aug 30, 2026
- Revenue (FY Aug 2026): $303.15B
- EV / EBITDA (FY Aug 2026): 31.5x
- P/E (FY Aug 2026): 50.6x
- Price / book: 13.04x
The 15 boxes
- ✓ 1. Long-form business notes
Across the six fiscal years to FY2026 (year ended 2026-08-30) every headline line grew, with no down year: revenue from $195.93B (FY2021) to $303.15B (FY2026), operating income from $6.71B to $11.69B, net income from $5.01B to $9.23B. Operating cash flow funded a steadily rising capex line ($3.59B FY2021 to $6.43B FY2026) and still reached $15.82B in FY2026, leaving cash of $20.21B and total equity of $35.80B. Buybacks were modest ($848.0M in FY2026) and diluted shares were flat at about 444M, so growth was not bought with leverage or share shrink. The supplied Item 1 Business extracts from the FY2026 and FY2021 10-Ks show only the section heading, so segment, channel and unit-economics detail cannot be sourced here.
- ✓ 2. Competitive advantage
Costco has a durable advantage built on a paid membership ($65 annual fee in the U.S.) wrapped around a deliberately low-margin, high-turnover warehouse model: 84.1M paid members at FY2026 end, a 92.3% U.S./Canada renewal rate, and under 4,000 SKUs per warehouse. Scale shows in the numbers: revenue rose from $195.93B in FY2021 to $303.15B in FY2026 and operating income rose every year from $6.71B to $11.69B, lifting operating margin from roughly 3.4% to 3.9% (computed from the XBRL revenue and operating income lines). It is not a local monopoly: Walmart/Sam's Club, BJ's, Target, Kroger and Amazon all compete, and many U.S. and international metros have multiple clubs. Geographic concentration in the U.S. and Canada (86% of 2026 net sales) is the main limit on the advantage.
- ✓ 3. 10-Q takeaways
Q3 FY2026 (twelve weeks to May 10, 2026) was a strong quarter: net sales $69.15 billion, up 11.6%, total-company comparable sales up 9.8% (6.6% adjusted for gasoline and FX), and digitally-enabled comps up 21.5%. Operating income rose to $2,815 million from $2,530 million on higher membership fees ($1,373 million vs $1,240 million), with net income of $2,192 million ($4.93 diluted). The balance sheet carries more inventory ($19,418 million vs $18,116 million at August 31, 2025) and more cash ($18,946 million), and 36-week operating cash flow was $11,133 million against $4,228 million of capex, with only $603 million of buybacks and $1,154 million of dividends. The 10-Q MD&A and Item 1A excerpts supplied here contain only section headings, so the 10-Q's own wording on margins, inventory and risk-factor changes cannot be quoted.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
Sign in with a QuantSignals Premium or Gold plan to read every box: each point linked to the SEC filing it came from, the bull and bear case, and the comparables. QS Research powers the signals behind FST, our autonomous trading agent.