Costco's Growth Holds, but Its Valuation Leaves Less Room for Error

Costco closed fiscal 2026 with the kind of operating figures that explain its long-term appeal. Net sales rose 10.1% to $297.25 billion, membership-fee revenue reached $5.91 billion, and net income increased to $9.23 billion. The harder question is how much of that strength is already reflected in the share price.

Total revenue, which includes membership fees, was $303.15 billion. Diluted earnings per share reached $20.76, though the fourth quarter included a $0.15 per-share benefit from a tariff refund. Digitally enabled comparable sales rose 20.7% after adjustments for gasoline prices and foreign exchange, evidence that Costco's growth is not limited to opening more warehouses.

The membership model remains central. Costco ended the year with 939 warehouses and 150.4 million cardholders. Customers pay before they shop, giving the company recurring fee income and an incentive to keep prices low enough to protect renewal rates. Membership fees accounted for less than 2% of total revenue but a much larger share of operating profit because the associated costs are relatively low.

That model also supports Costco's unusually durable customer economics. More members make the warehouse network more productive, while high sales volumes strengthen the company's bargaining position with suppliers. The result can be a reinforcing cycle of competitive prices, renewal income and traffic.

Investors should be careful, however, when using simplified long-term return comparisons. The source article compared a dividend-adjusted Costco investment with a price-only S&P 500 exchange-traded fund result. Because the index-fund calculation excluded reinvested dividends while Costco's included them, the figures are not an apples-to-apples measure of relative performance. Costco's historical return has still been strong, but the size of any claimed advantage should be calculated on the same total-return basis.

Valuation is the remaining constraint. At the source article's October 22 price, Costco traded at roughly 48 times trailing earnings. A multiple that high assumes that membership retention, store productivity and earnings growth will remain unusually resilient. It also makes one-time benefits, such as the fourth-quarter tariff refund, worth separating from recurring performance.

Costco does not need a dramatic new strategy to justify investor attention. It needs to keep adding members, expand without weakening warehouse economics and convert digital growth into profitable sales. Fiscal 2026 showed progress on each operating dimension. The investment debate is whether those gains can compound fast enough to support a valuation that already gives the company considerable credit for future execution.