COST remains a buy after upgrading near $890 and rising above $957; at forward P/E 38 vs usual 40s-50s, there is a little more time to buy, but a further rise would erase the margin of safety and approach losing the buying opportunity, though it is an excellent long-term investment.

On September 21, I upgraded Costco's stock rating to " buy" for the first time in many years since I began following the company. This is a company that typically trades at a high valuation because it is one of the best- run and managed companies in the world.

Since I upgraded Costco's stock rating to " buy" when it was priced at around $890 per share, it has already jumped to over $957. So, I wanted to go back and check whether it was still a buying opportunity or if it was too late, as Costco stock was, for a moment , trading at an attractive valuation.

One reason Costco consistently trades at a high rating is that its single-store sales are significantly better than those of many of its competitors.

For example, Costco generated $303 billion in revenue over the past twelve months. Although it owns only about 10% of Walmart's locations . So, Costco, which is about 10% the size of Walmart, generates roughly half of Walmart's sales.

This is because its sales per location, sales per square foot, and inventory turnover all outperform Walmart, Target, Home Depot, and virtually every other retailer you can imagine.

However, Costco operates on very small profit margins , and this is intentional. Its operating profit margin was 3.85% over the past twelve months. Well, that's up from about 3.2% in 2017, but it's not much, is it?

An operating profit margin of 3.85% is a very small margin . For every $100 in sales Costco makes, it earns about $4 in operating income. You should see the facial expressions of family, friends, students, and colleagues when I tell them this number about Costco.

The prevailing perception among many individuals is that Costco achieves huge profit margins because they see Costco performing very well. Whenever you visit Costco, you will find it crowded with many people buying many products.

All shopping carts are full. All the open checkout lanes are crowded and the lines are long. Therefore, it assumes that Costco is achieving excellent profitability. Isn't that so?

When I tell the university students about it, they are all shocked. Or, as you know, sometimes I assign a group project where I ask a group to compare Costco and Walmart. When they discover that Costco is achieving an operating profit margin of only about 3%, all the students in that group are surprised and shocked.

It is one of the smallest operating profit margins you would find in any successful company anywhere. Isn't that so? So, this is a surprising fact about Costco, but it's intentional and planned.

The company could, if it wanted to, achieve higher profit margins, but it chooses to pass on the benefits it achieves through its purchasing department . If they find better value, they pass it on to their buyers, i.e., their customers.

They want to offer that great value to customers and maintain their loyalty to Costco. This has been successful for decades.

Costco boasts one of the highest organ retention rates on the planet. 90% of Costco members renew their membership. These fees are substantial, so to speak , $60 for the basic plan, and $120.

Or have they just raised them to $70 and $130? I will need to check my annual membership as I am a Costco member, and we have found value in this business even though it is one of the least attractive places to shop for me due to the large number of people in the stores.

It feels like you have to run through the corridors, because if you stop for a moment, someone will hit you with their vehicle that is right behind you. But many members around the world appreciate the value that Costco offers.

This business generates attractive returns on invested capital because the capital circulates very quickly . For example, if Procter & Gamble sends a truck full of products to Costco , those products are sold before Costco has to pay Procter & Gamble for them. Isn't that so?

Typically, when conducting a transaction between two companies, the customer is given a grace period of 30 or 60 days to pay for the shipment of products that you send to the company.

Costco sells these products in a much shorter time than that deadline. And then she has this cash on which she can earn a small amount of interest before she has to pay back Procter & Gamble.

Therefore, this highly profitable business model allows Costco to achieve a return on invested capital of 22%, which is more than double the company's weighted average cost of capital, a very attractive ratio for investment.

I mentioned that I upgraded the stock rating on September 21st, and I can show you that here in my chart. I upgraded Costco's stock rating on September 21, 2026. I've already added a new column to my spreadsheet where I highlight the most recent change I've made to a company, and I can list that there for Costco. I upgraded it on September 21, 2026.

So you can see that it's not just when I update, sometimes I just repeat my review. For example, sometimes I have a stock rated as a " buy" and I make a video and say, "Well, it still looks like a buying opportunity."

Isn't that so? This is neither a promotion nor a downgrade. So it will be here in this column as an update only . But when I make a change, when I upgrade or demote, I will put it in the next column and then I will put the date on which I made that upgrade.

I did this so that I could better track my performance and so that you could also better track my performance .

Since you made that change, you mentioned that Costco's stock price is rising, right? On September 21, it was trading at around $897 per share, or rather $898 per share . Today it is trading at $956.

So it has gone up by about $60 per share since I made that update. So I'm pleased to see the stock price actually rising since I made that upgrade.

However, it was also good to give people more time to accumulate Costco shares because they rarely trade at an attractive valuation. However, I still see it currently as having a relatively attractive valuation at a forward P/E ratio of 38.

You can see that from the forward P/E ratio here; it is rarely traded at a forward P/E valuation in the thirties. It is usually traded at a forward price-to-earnings ratio in the forties, and sometimes even exceeds fifty.

And I feel that , you know, is a little over the top and a little expensive . And then I say it's too late to buy Costco stock and I'll wait for a better opportunity.

But right now at a forward P/E ratio of 38, I think there's a little more time to buy Costco stock, but if it goes up a little more, I'd say the margin of safety has evaporated and it's getting very close to losing being a buying opportunity, even though it's a great company, an excellent long-term investment, and there's still a little time left.

Therefore, I will reiterate my buy recommendation for Costco here today, October 13, 2026.