Is Costco Wholesale Corporation (COST) overvalued or undervalued?
Updated Nov 10, 2026 · hand-researched model · educational, not advice
At a recent price of $1,066, Costco Wholesale Corporation (COST) trades 207% above TickerWorth's blended fair value of $347.16 per share — a discounted-cash-flow model cross-checked against peer multiples and asset value — meaning the market currently prices COST overvalued vs our estimate of what the business is intrinsically worth. Our fair value sits below the market, an implied -67.4% move to close the gap if the business performs in line with our assumptions. This is an educational model, not a price target or a recommendation — the value moves with the inputs, which you can test yourself using the WACC slider below.
One of the lenses behind that blended figure is a discounted-cash-flow model, which on its own values COST at about $302.31 per share. The rest of this page walks through that DCF — its assumptions, reverse-DCF and discount-rate sensitivity — because it is the auditable anchor of the blend.
The valuation discounts Costco Wholesale Corporation's projected free cash flows at a weighted-average cost of capital (WACC) of 9.4%, with a long-run terminal growth rate of 2.5%. About 74% of the enterprise value comes from the terminal value — the portion beyond the explicit forecast window — which is typical for a stable, cash-generative business and a reminder that small changes in the discount rate or terminal growth assumption swing the intrinsic value meaningfully.
Running the DCF in reverse — solving for the growth the current price already assumes — COST would need sustained revenue growth of more than 25%/yr to justify today's price, against about 7.4% a year compounded in our base case. We don't quote a precise figure here, because past about 25% a year the reverse-DCF stops being informative: it solves for revenue growth alone, holding margins, capital intensity and the forecast horizon fixed, so a price well above our fair value has nowhere to go but growth. The honest reading is that the price implies growth this model can't reconcile — not that we forecast it.
Sensitivity matters more than any single number. Across a reasonable band of discount-rate assumptions, COST's modeled DCF value ranges from about $234.87 to $445.27 per share. If that range still sits below today's price, the market is optimistic relative to the model across the whole band; if it brackets the price, the stock is roughly fairly valued on our assumptions. Use the interactive slider to see exactly where your own cost-of-capital view lands.
How to read this page: the DCF fair value is what Costco Wholesale Corporation would be worth if its cash flows grow as modeled and are discounted at the stated WACC. The assumptions table shows every input and its source; the reverse-DCF shows what the market believes; the sensitivity band shows how fragile the answer is. None of this is investment advice — it is a transparent, auditable framework for forming your own view of COST's intrinsic value. Figures update as new filings and prices come in.
The assumptions behind COST's DCF
| Input | Value | Source |
|---|---|---|
| Base-year revenue | $275,235,000,000 | Costco FY2025 10-K (accession 0000909832-25-000101, filed 2025-10-08), 52 weeks ended 2025-08-31: Total revenue = net sales $269,912M + membership fees $5,323M (us-gaap:Revenues FY2025 = $275,235M). +8.2% on FY2024's $254,453M, and FY2024 was a 53-WEEK year, so the like-for-like 52-week growth was higher still. WHY FY2025 AND NOT FY2026: the FY2026 10-K is NOT yet filed (submissions JSON checked 2026-10-03; Costco filed the FY2025 10-K on 2025-10-08, so FY2026's is due within days). The house rule is that the base year needs a filed 10-K, so FY2025 is the base and the already-completed FY2026 is Year 1 of the forecast, read off the unaudited Q4 release. CROSS-CHECK: FY2026 total revenue was $303,154M (8-K Ex-99.1, 2026-09-24), +10.1% — that is Year 1, not a projection. |
| Base EBIT margin | 3.8% | Costco FY2025 10-K (accession 0000909832-25-000101): Reported operating income $10,383M / total revenue $275,235M = 3.772%. Costco reports an operating-income line, so nothing here is derived. THE PROFIT ENGINE IS THE MEMBERSHIP FEE: fees of $5,323M were 51% of FY2025 operating income, and $5,907M was 51% of FY2026's $11,685M. Merchandise is sold at a gross margin of roughly 11% that just about covers SG&A; the fee is close to pure profit. That is why a 3.8% margin is not a weak business — it is a deliberate price cap. Margin has climbed ~10bp a year: 3.65% FY2024, 3.77% FY2025, 3.85% FY2026. CROSS-CHECK (Q4 FY2026, 16 weeks): $3,801M / $95,723M = 3.97%, flattered by IEEPA tariff refunds of $174M (plus $10M interest) less partial reinvestment in price — management sized the net benefit at $0.15 per diluted share. |
| Forecast revenue growth | 10% → 8% → 7% → 6% → 6% | Assumption — TickerWorth's 5-year explicit forecast |
| Risk-free rate | 5.2% | US 10Y Treasury constant maturity (FRED DGS10): 5.24% on 2026-10-01, the latest published observation. Shared by every model in this tracker. |
| Beta | 0.85 | Yahoo Finance 5Y-monthly beta via yfinance, read 2026-10-03: Published 5Y-monthly beta 0.855, used AS IS — no normalization. A warehouse club selling staples, fuel and pharmacy to members who renew at ~90% is a genuinely defensive business, and there is no spin-off, recapitalization or one-off event in the window that would distort the regression. Each 0.1 of beta is worth roughly $20/share. NB the reverse DCF: NO beta reaches today's price — even a beta of zero (WACC = 5.22%, essentially the risk-free rate) leaves the model below $920.65. |
| Terminal growth | 2.5% | Assumption — house default: House default 2.5% (roughly long-run nominal GDP), kept for comparability with every other company in this tracker. FLAG: this is a LOW number for Costco specifically — it has compounded revenue at high single digits for decades and still adds ~3% to its warehouse count every year, with international (Japan, Korea, Europe, China) under-penetrated. But a perpetuity has to sit below the economy's growth rate eventually, and the house rule is not bent company by company. 3.0% adds ~$17/share ($319.09); 2.0% takes ~$15 off ($287.80). The price needs ~7.6% forever. Must remain < WACC of 9.42%. |
| Diluted shares | 444M | Costco Q4/FY2026 earnings release, 8-K Ex-99.1 (accession 0000909832-26-000084): Q4 FY2026 (16 weeks to 2026-08-30) weighted-average diluted shares 444,364K — the latest quarter, more recent than the Q3 10-Q's 444,430K. Full-year FY2026 was 444,427K. Shares outstanding were 443,266K at year end. The count is FLAT: buybacks ($848M in FY2026) roughly offset RSU issuance (SBC $924M), so dilution is not a meaningful drag here. |
| Market price | $1,066 | Delayed quote · as of 2026-11-10 05:51 UTC |
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