- Costco Wholesale (COST) has competitive advantages as inflation hits consumers’ pocketbooks.
- At the same time, Costco Wholesale stock is trading at a reduced price point.
- Investors should think about going shopping for a terrific bargain, while Costco Wholesale shares are still very reasonably priced.
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Washington-headquartered Costco Wholesale (NASDAQ:COST) is known for offering essential goods at a discount to its customers. Speaking of which, COST stock is trading at a discount and it looks ready to rebound.
Just a few years ago, two consecutive U.S. Consumer Price Index prints of 8% or greater would have been inconceivable. Yet, here we are and inflation has definitely not been “transitory” (to borrow a word from the Federal Reserve).
If there’s any business that’s poised to benefit from persistently high inflation, it’s Costco. The company has competitive advantages due to its subscription-based business model, loyal customer base and comparatively low product prices.
With that in mind, let’s delve into some compelling reasons to consider a stake in Costco shares during these admittedly challenging economic times.
What’s Happening with COST Stock?
After trading at a 52-week high of $612.27, COST stock recently came down to the $425 area. This should pique the interest of value investors, who should lean into lower prices instead of avoiding them.
Just as being a Costco member has benefits, so does being a shareholder. In particular, Costco pays a forward annual dividend yield of 0.73%, which is the icing on the cake for long-term stockholders.
Additionally, Costco has a trailing 12-month price-to-earnings ratio of 34.39x. This is not unreasonable and indicates that Costco is profitable, while the stock price isn’t higher than it ought to be.
Thriving Even During High Inflation
When we say, “profitable,” we’re talking about nearly $1.3 billion in net income during Costco’s second quarter of fiscal 2022. That’s another competitive advantage: Costco is a massive company with a strong earnings profile.
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On top of all that, there’s data to show that Costco is capable of growing its sales even when inflation is high. During the month of April, Costco reported a whopping $17.33 billion in net sales. This figure represents an impressive 13.9% increase on a year-over-year basis.
Not only that, but we can extend the time frame and discover even better results. Thus, during the 35 weeks ended May 1, 2022, Costco reported net sales of $147.33 billion, up 16.4% versus the comparable period of 2021.
What You Can Do Now
There’s no telling how much longer high inflation will persist. It’s a reality that’s hitting the consumer’s pocketbook hard.
Yet, Costco’s business is clearly thriving. Indeed, the data indicate that Costco is able to increase its net sales and income even during a period of elevated inflation.
All in all, the bull case for COST stock remains intact, and is even stronger now that the share price is down. Therefore, don’t hesitate to consider taking a position in Costco shares for great value and consistent dividend payments.
On the date of publication, Louis Navellier had a long position in COST. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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