Costco had a great quarter. What are we actually paying for with $COST?

The new Costco numbers are strong enough that I can see why people get tired of hearing "great company, expensive stock." Q4 net sales grew 11.2% to $93.9 billion. Comparable sales grew 6.7% after stripping out gas-price and currency changes. Full-year EPS went from $18.21 to $20.76. The quarter's $6.75 EPS did include a one-off $0.15 benefit from tariff refunds, so I wouldn't annualize that part.

What interests me more is how the membership fee changes the store economics. For the full fiscal year, $COST had $297.2 billion of merchandise sales and $264.3 billion of merchandise costs. That's about $33.0 billion of merchandise gross profit. Subtract $27.2 billion of selling and admin costs and you have about $5.8 billion before membership fees. Then $5.9 billion of fee revenue gets you to roughly $11.7 billion of operating income.

That arithmetic is why the membership matters so much. It isn't a claim that every dollar of fees is a separate dollar of profit. Low merchandise prices help keep members around, and the warehouses and labor costs serve both sides of the model. But it does show how much of the profit engine depends on people deciding the annual fee is still worth paying.

Fees rose from $5.32 billion to $5.91 billion for the year. Operating cash flow was $15.83 billion and additions to property and equipment were $6.44 billion, leaving about $9.39 billion before dividends and buybacks on that simple cash-flow calculation. That's good cash generation, though new warehouses require a lot of capital. Costco spent $848 million on repurchases during the year while the year-end share count was basically flat; I wouldn't build a big buyback thesis here.

The hard question is price. A business with that kind of member loyalty can keep surprising people who wait forever for a textbook multiple. But a high starting valuation still asks for years of solid renewals, productive new stores and controlled operating costs. If membership growth slows or wages take a bigger bite, a very good company could still deliver mediocre returns from the wrong entry price.

I'd like to see people put an actual hurdle on it: what earnings or cash-flow yield would make $COST attractive to you, and what growth rate are you assuming to get there? I find that more useful than calling the stock "always expensive" and moving on.

Source: Costco fiscal Q4 and FY2026 results