Friday, October 14, 2011

Is Costco a bargain?

COMPLETE ARTICLE AND MORE GRAPHS

Many shoppers look to Costco Wholesale Corp (COST) to stretch their consumer dollar but is its stock a bargain?  I've read comparative data about the typical members' income and learned that Costco shoppers have a higher annual income than BJ's and Sam's.  This allows for a higher quality and higher priced inventory and the ability to be more flexible in passing on inventory price increases to their members.  As this graph provided by Barchart of yearly stock price vs the 20, 50 and 100 day moving averages shows the stock has had a good year up almost 31%:



Barchart technical indicators:

  • Barchart uses various methods of technical analysis of price movements from 7 day to 6 months to form opinions on the price trend - the sell signals are getting weaker and the buy signals are getting stronger
  • 40% Barchart technical buy signal which is strengthening
  • Trend Spotter buy signal
  • Trading above its 20, 50 and 100 day moving averages
  • The price has moved higher in 3 of the last 5 trading sessions and is up 3.10% in the last week
  • Up 30.51% in the last year
  • Relative Strength Index is 52.64
  • Barchart computes a technical support level at 81.15
  • Recently traded at 81.65 with  a 50 day moving average of 79.12

Summary:  Personally I like looking at the numbers of increasing sales and earnings.  I like the Costco (COST) numbers but note that the sales and earnings growth trend seems to be fully realized in the 50% higher than market P/E ratio.  If you have this stock I'd continue to hold it but if you are looking for a place to invest new money I'd look for a company with better sales and earnings projections and a bargain P/E ratio.  Over the next 5 years in think investors will still see an annual total return in the range of 6% - 9%.

Jim Van Meerten is a Marketocracy Master




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