Costco Stock Overvalued by 107%, DCF Analysis Reveals

ISSAQUAH, Wash. — Costco Wholesale Corp (COST), the membership-based retail giant, is trading at a significant premium compared to its intrinsic value, according to a recent discounted cash flow (DCF) analysis. The stock, currently priced at $944.70, is overvalued by 107.33% based on a DCF valuation of $455.65 per share.

Costco operates over 600 warehouses in the United States and 280 internationally, primarily in Canada, Mexico, Japan, and the UK. The company’s no-frills retail model, which emphasizes bulk sales and low operational costs, has allowed it to dominate the warehouse club industry with over 60% market share domestically.

Despite its strong market position, the DCF analysis reveals a stark discrepancy between the stock’s market price and its calculated value. The analysis projects free cash flows (FCFs) from 2025 to 2029, with present values ranging from $6.97 billion to $7.86 billion. The terminal value, calculated at $237.93 billion, further supports the overvaluation conclusion.

“The DCF value of $455.65 per share is significantly lower than the current market price of $944.70,” the report states. “This indicates a margin of safety of -107.33%, suggesting the stock is overvalued.”

Costco’s recent performance has been strong, with its share price rising 36.42% over the past 12 months. However, the DCF analysis raises questions about whether the current valuation is sustainable given the company’s projected cash flows and growth rates.

Investors and analysts will likely monitor Costco’s upcoming earnings reports and market trends to assess whether the stock’s premium pricing aligns with its long-term financial performance.