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Why Costco Seems A Little Overpriced

The largest warehouse retailer in the U.S., Costco (COST) has not had any growth problems over the past several years. In fact, it has reported impressive growth quarter after quarter, driven by its rising member base and steady expansion. From 2008 to 2013, the retailer's total cardholders increased from 54.2 million to 72.8 million, and its store count increased from 512 to 634. Simultaneously, revenues increased by an average of almost 8% annually. With consistent strong financial performance, Costco's stock increased by more than 100% over the same period.

However, the retailer's stock has been up just 18% in the last one year, despite sturdy growth in comparable sales amid a weak retail environment. It appears that the market is not reacting too positively to Costco's steady growth anymore, due to the anticipation that it will continue in the future without any hurdles. Still, we believe that the company might… Read More …