COST
Costco Wholesale Corporation
$981.48
Stable Earnings Power
80%
P/Adj-EPS × Normalized Multiple
Moderate
·
Conviction
Overvalued
Trading 27.4% above fair value
You pay
$981.48
Bear
$634.42
Fair
$770.36
Bull
$906.31
Bear
$634.42
-35.4%
$20.76 × 31x P/E
Fair
$770.36
-21.5%
$20.76 × 37x P/E
Bull
$906.31
-7.7%
$20.76 × 44x P/E
Adjust Assumptions
37.1x
20.76$
Key Value Driver
Normalized P/E multiple (37x base case)
Implied Market Multiple
47.3x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (59 analysts)
$1097.70
Divergence from AlphaVal
30%
Summary
Applying a 37x P/E to adjusted EPS of $20.76, the base-case value is $770.36 per share.
Warnings
Wall Street's average price target is $1097.70 (from 59 analysts). Our estimate is 30% below the consensus -- consider that gap carefully.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples