QS Research · Michael Burry's Scion Capital analyst template · 2006
COSTCO WHOLESALE CORP /NEW (COST)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case -20% · downside -30% · upside +10%
Costco is a genuine secular compounder: revenue rose every year from $195.93B in FY2021 to $303.15B in FY2026 and operating income from $6.71B to $11.69B, with 92.3% U.S./Canada renewal and net cash. But the price already discounts that quality at 51.0x FY2026 P/E and 31.7x EV/EBITDA, the highest in the peer table. Using FY2026 EBITDA of $14.36B, my base case applies 25x EV/EBITDA, a premium to WMT's 22.0x but below today's 31.7x, plus $15.14B net cash to get about $844/share, -20.5% from $1,061.58. The downside case applies WMT's 22.0x and gives about $747/share, -29.6%, while the upside case grows EBITDA 10% at today's 31.7x and yields about $1,164/share, +9.7%. The arithmetic says the stock is overvalued, but the base case does not clear the -30% short threshold and the upside is not enough for a long; it is a watch, not a short, because a quality compounder can stay expensive longer than a short can wait.
Key numbers
- Share price: $1,061.58
- Market cap: $470.42B
- Latest financial period: FY Aug 2026 to Aug 30, 2026
- Revenue (FY Aug 2026): $303.15B
- EV / EBITDA (FY Aug 2026): 31.7x
- P/E (FY Aug 2026): 51.0x
- Price / book: 13.14x
The 15 boxes
- ✓ 1. Long-form business notes
Across the six fiscal years in the XBRL window (FY ended 2021-08-29 through 2026-08-30), revenue rose every single year from $195.93B to $303.15B and operating income from $6.71B to $11.69B, with no year of decline — the definition of a secular grower in this template. Cash generation scaled faster than earnings: operating cash flow went $8.96B to $15.82B while capex went $3.59B to $6.43B, and the balance sheet thickened (cash $11.26B to $20.21B, equity $17.56B to $35.80B). The share count is essentially frozen at ~444M with buybacks under $1B a year, so per-share growth has come from operations, not shrinkage of the float. The narrative of *how* those dollars are earned (membership vs merchandise, warehouse channel, unit economics) sits in the two 10-K Item 1 Business filings, whose body text was not supplied.
- ✓ 2. Competitive advantage
Yes, durable: Costco's edge is a deliberately thin-margin, high-turnover, membership-fee model that it runs at scale — 939 warehouses at August 30, 2026, under 4,000 SKUs per warehouse, and 84.1M paid members with a 92.3% U.S./Canada renewal rate. Operating margin is only about 3.9% in FY2026 ($11.69B on $303.15B revenue) but it has widened from about 3.4% in FY2021, and operating income grew from $6.71B to $11.69B while cash flow funded capex internally. The competitive field is real and named in the filing — Walmart, Target, Kroger, Amazon, Sam's Club, BJ's — but none of the sources shows a competitor's economics to test the gap.
- ✓ 3. 10-Q takeaways
The supplied sources are only the 10-Q MD&A and Risk Factors section metadata for the quarter ended 2026-05-10, filed 2026-06-03. They contain no sales, comparable-sales, margin, inventory, cash, buyback, or guidance figures, so the quarterly operating trend cannot be assessed from this material.
- ✓ 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.
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