Costco

Methodology

Costco's membership-based warehouse model generates remarkably stable earnings with high predictability, making fair value calculations straightforward and reliable. Membership fees provide recurring revenue that drives most profits, while merchandise sales operate near break-even. The method works well given consistent mid-to-high single-digit earnings growth from new warehouse openings.

Methodology

Costco consistently trades at PEG ratios between 2.0-3.5x, reflecting premium valuations for its exceptional business quality and customer loyalty. The membership model creates competitive moats and pricing power that justify higher multiples than traditional retailers. PEG appears expensive but reflects sustainable competitive advantages and reinvestment opportunities.

Methodology

Costco pays a minimal regular dividend yielding under 1%, making PEGY nearly identical to PEG for valuation purposes. The company periodically issues special dividends funded by debt, returning excess cash to shareholders. Total return focuses primarily on earnings compounding rather than income generation, with occasional special dividend surprises.