What’s Up With Costco Wholesale Corporation (COST)?

Costco continues to open new warehouses in North America, suggesting that it has not yet saturated that market. However, Europe, Asia, and Australia represent big future opportunities for the company. Costco already operates in the U.K., Japan, Korea, Taiwan, and Australia, with plenty of room for growth in all of those markets. The company is also interested in entering continental Europe, which could eventually become a large market for Costco.

With all of these opportunities, the company should be able to keep growing its warehouse count by 3% to 5% annually for the next decade and beyond. Comparable-store sales should also continue to grow as Costco takes share from less-efficient competitors. This provides a road map to long-term value creation for Costco shareholders.

Foolish bottom line
Costco has hit upon a winning formula for long-term profit growth with its low-cost model and commitment to keeping prices low for customers. The company’s cost advantages constitute a wide moat that should keep it immune to the disruption occurring elsewhere in retail. Moreover, Costco Wholesale Corporation (NASDAQ:COST) has only penetrated a small portion of its worldwide market opportunity. As a result, Costco stock seems like a bargain, even at 25 times earnings.

The article Why Costco Stock Keeps Rising originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg is short shares of Amazon.com. The Motley Fool recommends Amazon.com and Costco Wholesale. The Motley Fool owns shares of Amazon.com and Costco Wholesale.

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