Costco (NASDAQ: COST) has historically been a wonderful investment. Shares have significantly outperformed the S&P 500 in the past three decades. But that track record hasn’t held up recently, with the retail stock dropping 14% in the past 12 months (as of Dec. 16). The index is up double digits at the same time.
Where will Costco be one year from now?
Over a shorter time horizon, market sentiment has the biggest impact on stock prices. This is reflected in valuation. Costco doesn’t look cheap, as it trades at a price-to-earnings (P/E) ratio of 45.8, in line with the trailing five-year average. That has come down considerably since the start of this year, though.
This valuation looks pricey, but it’s worth highlighting that the market typically rewards Costco with an elevated P/E multiple. That’s because the investment community understands that this is an exceptional business.
Costco constantly posts same-store sales growth, regardless of economic conditions. It has an extremely loyal customer base. And its scale provides it with a major cost advantage, allowing it to sell merchandise at low prices. Plus, new store growth indicates opportunity ahead.
The stock is about to finish 2025 with a loss. Looking at the next 12 months, I expect the market to once again appreciate the company’s dominant industry position and solid financial results. I wouldn’t be surprised to see Costco shares post a double-digit gain in 2026.
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