COST
Costco Wholesale Corporation
Consumer Defensive · Discount Stores · United States · Stock
Score Breakdown
Scored for Safe Long-Term Investing profile
Sub-scores are 0–20 each; Model Score is weighted by your selected investment goal. How it works →
Why Ranked Here
- Strong financial health (interest coverage of 67.4) and solid momentum (two consecutive quarters of rising operating and net income) anchor the composite score, while mid-range growth and profitability scores moderate the overall result.
- The dividend payout ratio of 27.0% reflects an established but conservative capital return program, contributing a midpoint score that neither boosts nor significantly drags the composite.
- The absence of a macro theme assignment means no thematic score contribution was applied, capping the total composite below what otherwise strong fundamentals might suggest.
Why Not Higher
- Thin net (2.9%) and operating (3.8%) margins in FY2025 produced a below-midpoint profitability score, as the model penalizes compressed margins even when asset returns are solid.
- Revenue growth of 8.2% and EPS growth of 10.0%, while consistent, were not exceptional enough under the model's scoring methodology to push the growth factor into a higher tier.
Data Confidence
10 / 10
Very High — full data coverage
Why This Score
Grounded in figures from this company's SEC EDGAR filings — not a restatement of the score itself.
Revenue grew from FY2024's $254,453,000,000 to FY2025's $275,235,000,000 (+8.2%), net income rose from FY2024's $7,367,000,000 to FY2025's $8,099,000,000 (+9.9%), and diluted EPS increased from FY2024's $16.56 to FY2025's $18.21 (+10.0%).
The model recognized consistent top-line and bottom-line expansion across FY2024 to FY2025, but the mid-range score suggests the growth rates, while positive, were not exceptional enough to earn a higher tier under the model's scoring methodology.
In FY2025, Costco reported a net margin of 2.9%, an operating margin of 3.8%, and a return on assets of 10.5%.
The model likely penalized the very thin net and operating margins typical of a high-volume, low-markup retailer, even though the 10.5% return on assets in FY2025 reflects efficient use of the asset base; the combination of compressed margins and solid asset returns produced a below-midpoint profitability score.
In FY2025, Costco's interest coverage ratio (operating income divided by interest expense) stood at 67.4, indicating operating income vastly exceeds interest obligations.
An interest coverage ratio of 67.4 in FY2025 signals an exceptionally strong ability to service debt, which the model rewarded with a high financial health score; the remaining gap from a perfect score likely reflects data limitations on other health metrics.
Over the last four reported quarters, revenue moved from $86,156,000,000 in 2025Q4 to $67,307,000,000 in 2026Q1, $69,597,000,000 in 2026Q2, and $70,527,000,000 in 2026Q3; operating income followed a similar pattern of $3,341,000,000, $2,463,000,000, $2,606,000,000, and $2,815,000,000; and net income was $2,610,000,000, $2,001,000,000, $2,035,000,000, and $2,192,000,000 across those same quarters.
After a seasonally elevated 2025Q4, all three metrics show a sequential recovery trend through 2026Q1 to 2026Q3, with operating income and net income each rising for two consecutive quarters, a pattern of re-acceleration that the model rewarded with an above-average momentum score.
In FY2025, Costco's dividend payout ratio (dividends paid divided by net income) was 27.0%.
A 27.0% payout ratio in FY2025 indicates the company returns a meaningful but conservative share of earnings to shareholders as dividends, which the model scored at the midpoint, reflecting an established but not outsized dividend commitment.
Costco is not currently assigned to any of the 24 tracked macro themes.
The absence of a macro theme assignment means no theme-based score contribution was applied under the model's current methodology; this is a neutral classification and does not reflect on the company's business quality.
Research Summary
AI-generated analysis reflects data and conditions as of the report date shown above. Verify any specific figures through primary sources before acting on this analysis.
Costco delivered steady annual growth in FY2025, with revenue rising 8.2% to $275.2 billion, net income up 9.9% to $8.1 billion, and diluted EPS climbing 10.0% to $18.21, reflecting consistent top- and bottom-line expansion. Profitability margins remain structurally thin at 2.9% net and 3.8% operating, characteristic of the high-volume, low-markup warehouse retail model, though a 10.5% return on assets signals efficient deployment of its $77.1 billion asset base. Financial health is a standout, with an interest coverage ratio of 67.4 in FY2025 indicating operating income vastly exceeds debt obligations. Recent quarterly momentum shows a recovery trend from 2026Q1 through 2026Q3 in both operating and net income, adding a constructive near-term signal.
Plain English
Costco is a massive retailer that keeps growing steadily — sales and profits both rose roughly 10% last year — and it carries almost no meaningful debt risk, though its profit margins are razor-thin because it sells products at very low markups.
Bull Case vs. Bear Case
Bull Case
- Exceptional balance-sheet strength: an interest coverage ratio of 67.4 in FY2025 means operating income is nearly 70 times interest expense, leaving the company with enormous financial flexibility.
- Consistent earnings growth: diluted EPS rose 10.0% year-over-year from $16.56 to $18.21, and net income grew 9.9% to $8.1 billion in FY2025, demonstrating reliable compounding of shareholder value.
- Recovering quarterly momentum: operating income climbed from $2,463 million in 2026Q1 to $2,606 million in 2026Q2 and $2,815 million in 2026Q3, signaling re-acceleration after a seasonally elevated 2025Q4.
Bear Case
- Structurally compressed margins: a net margin of just 2.9% and operating margin of 3.8% in FY2025 leave little room for error if costs rise or revenue growth slows.
- Growth rates, while positive, are moderate: the 8.2% revenue increase and roughly 10% earnings growth, though consistent, were not exceptional enough to score in the upper tier of the model's growth methodology.
- No macro theme tailwind: Costco is not currently assigned to any of the 24 tracked macro themes, meaning it receives no additional score contribution from thematic momentum that could lift the composite rating.
What Could Change the Picture
Bullish Triggers
- A sustained acceleration in quarterly revenue or operating income beyond the current 2026Q1-to-2026Q3 recovery trend could signal that growth is re-rating to a higher tier.
- Expansion of the return-on-assets figure above 10.5% would demonstrate that the asset base is being leveraged even more efficiently, strengthening the profitability case.
Bearish Triggers
- Any meaningful compression in the interest coverage ratio from its current 67.4 level — for example, from a significant debt increase or operating income decline — would erode the primary financial health advantage.
- A reversal of the sequential quarterly recovery, with operating or net income declining from the 2026Q3 level of $2,815 million and $2,192 million respectively, would undermine the momentum thesis.
Risk Profile
Very Low RiskCostco's risk profile is rated Very Low, supported primarily by an interest coverage ratio of 67.4 in FY2025, which indicates operating income is nearly 70 times interest expense and leaves the company with substantial capacity to absorb financial stress. The sequential recovery in operating income across 2026Q1 through 2026Q3 further reinforces operational stability.
This report is for educational and research purposes only. It does not constitute financial, investment, legal, or tax advice — always conduct your own due diligence before making investment decisions.