Costco Wholesale Corporation (NASDAQ:COST): Has Recent Earnings Growth Beaten Long-Term Trend?
Investors with a long-term horizong may find it valuable to assess Costco Wholesale Corporation's (NasdaqGS:COST) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Costco Wholesale is currently performing.
View our latest analysis for Costco Wholesale
Did COST's recent earnings growth beat the long-term trend and the industry?
COST's trailing twelve-month earnings (from 24 November 2019) of US$3.7b has jumped 15% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 12%, indicating the rate at which COST is growing has accelerated. What's enabled this growth? Well, let’s take a look at whether it is merely attributable to industry tailwinds, or if Costco Wholesale has experienced some company-specific growth.
In terms of returns from investment, Costco Wholesale has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.3% exceeds the US Consumer Retailing industry of 4.9%, indicating Costco Wholesale has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Costco Wholesale’s debt level, has declined over the past 3 years from 22% to 19%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 40% to 42% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Costco Wholesale to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for COST’s future growth? Take a look at our free research report of analyst consensus for COST’s outlook.
Financial Health: Are COST’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 24 November 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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