Investors who have owned stocks in the last year have generally experienced some big gains. In fact, the SPDR S&P 500 ETF Trust total return over the last 12 months is 28.8 percent. But there is no question some big-name stocks performed better than others along the way.
Costco’s Big Year
One company that has been a strong investment in the past year has been membership-only retailer Costco Wholesale Corporation.
Costco has generated industry-leading growth and market-beating returns for years now, and recent quarters have been no different. Its membership-based, low-cost model makes it difficult for companies to compete with Costco’s value, and Costco’s membership fees are also a primary source of high-margin revenue for the company.
Costco may not be the most exciting company or stock in the market, but its stellar business model has been a consistent source of returns for long-term investors. Costco currently has more than 61.7 million paid members, up from just 53.9 million in fiscal 2019.
While many other retailers are struggling to gain back their pre-COVID-19 pandemic business, Costco’s business is booming, including 16.6 percent revenue growth, 15 percent same-store sales growth, and 14.3 percent online sales growth in the fiscal first quarter.
Unfortunately, Costco’s stock has performed so well in recent years that it has gotten a bit pricey for a retailer, trading at nearly 40 times forward earnings.
At the beginning of 2020, Costco shares were trading at $294.06. By the beginning of March, the stock was still trading around $294 as news of the coronavirus spreading in China prompted concerns about a U.S. pandemic.
When the market crashed during the U.S. COVID-19 outbreak in March, Costco shares dropped as low as $271.20 during the height of the pandemic fears.
When the market bounced off pandemic lows, Costco began to rebound as well. The stock returned to its pre-pandemic highs of around $325 by July and broke out to new highs in early August, eventually reaching a 2020 high of $393.15 in November.
Costco in 2021, Beyond
Costco stock pulled back to as low as $307 in March 2021 before regaining its bullish momentum. The stock hit $400 in July, $500 in November, and an all-time high of $566.55 earlier this month. Today, shares are hovering around $547.
Costco investors who bought one year ago and held on hoping for a big 2021 performance have generated an impressive return on their investment at this point. In fact, $1,000 in Costco stock bought on Dec. 20, 2020, would be worth about $1,503 today, assuming reinvested dividends.
Looking Ahead
Analysts are expecting little price action from Costco in the next 12 months. The average price target among the 28 analysts covering the stock is $563, suggesting a 3 percent upside from current levels.
By Wayne Duggan
© 2021 The Epoch Times. The Epoch Times does not provide investment advice. All rights reserved.
