馃洅 COSTCO WHOLESALE CORP: ANALYSIS 馃洅
Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. It offers branded and private-label products in a range of merchandise categories. The company has warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, South Korea, Taiwan, Australia, Spain, Iceland, France, and China. It also operates e-commerce websites in the United States, Canada, the United Kingdom, Mexico, South Korea, Taiwan, Japan, and Australia.
Based on a sample of the last year [2Q/23 TTM], its average margins have been:
- Gross margin: ≈ 12.2%
- Operating margin: ≈ 3.4%
- EBITDA margin: ≈ 4.2%
- Net margin: ≈ 2.6%
Pros:
- Membership and warehouse club revenues, with potential for expansion to other countries.
- Zero net debt
- High ROIC/ROE compared to any other in this segment.
Cons:
- More or less replicable business model with low margins.
- Increased OPEX vs. CAPEX (CAPEX growth > CAPEX maintenance)
- High current valuation based on average multiples
Based on the last report, their normalized EPS was ≈ $14.20 USD and its last average ROIC [TTM] was ≈ 19.77%. If an average Forward PER 35 is set as a benchmark with a sensitivity of ± 15.9%, the potential forward spread target could be:
- Optimistic: ≈ $576.4 USD
- Neutral: ≈ $497.34 USD
- Negative: ≈ $418.28 USD
At least, an EPS of $3.04 USD is required for the next quarter, to keep the metrics.
In other hand, if an average Forward EV/EBITDA 22 is set, an EBITDA increases of ± 8%, a Net Debt increases of 0%, a Dividends increase of 13.63% and Shares Outstanding increases of 0.05%, the potencial spread price target could be:
- Optimistic: ≈ $567.1 USD
- Neutral: ≈ $528.2 USD
- Negative: ≈ $487.7 USD
Finally, according to its current P/S ration, a possible spread might be at:
- P/S 0.5: ≈ $273.6 USD
- P/S 1.5: ≈ $820.8 USD
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J. Joel Padilla
Copyright Joel Padilla 2023: https://www.linkedin.com/posts/joelpadilla_joelpadilla-finance-economy-activity-7112996157923938304-jlCd?utm_source=share&utm_medium=member_desktop
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