Every once in a while, a stock comes along that makes you question everything you thought you knew about “expensive” valuations.
I’ve been watching the markets for over two decades, and honestly, Costco is the one that keeps proving the skeptics wrong year after year. Yesterday morning, during his daily Investing Club livestream, Jim Cramer looked straight into the camera and called Costco “one of the greatest performers of all time.” Not “one of the best retailers.” Not “a great stock. One of the greatest of all time. That’s the kind of statement that stops you mid-sip of coffee.
And the wild part? He said it on a day when the stock was down 3% after November same-store sales came in ever-so-slightly lighter than October’s pace. Most talking heads would be screaming “slowdown!” Instead, Cramer basically shrugged and reminded everyone to zoom out.
The Long Game Almost No One Wants to Play
Let me take you back for a second. If you had put $10,000 into Costco when it went public in December 1985, that investment would be worth more than $12 million today with dividends reinvested. Yes, you read that right. Twelve million dollars. That beats Apple, Amazon, Netflix, and almost everything else you can think of over the same horizon.
Think about that the next time someone tells you the stock is “too expensive” at 50+ times earnings.
“There are periods of underperformance in Costco, but if you look at the longer term, it’s one of the greatest performers of all time.”
– Jim Cramer, December 4 2025 Morning Meeting
That single sentence sums up everything you need to know about how to think about this company. Short-term noise is irrelevant when the business model is this bulletproof.
Why the Membership Model Is Basically a Moat Made of Diamond
Most retailers live and die by quarterly comparable sales numbers. Costco laughs at quarterly comparable sales numbers.
Here’s the magic: roughly 90% of Costco’s operating profit comes from membership fees. That means the company makes money before a single customer even walks through the door and buys anything. The actual retail operation? It runs on razor-thin margins on purpose—Costco marks up goods just enough to cover costs and keep the shelves full.
The result is a virtuous cycle most companies can only dream of:
- Customers pay $60–$120 per year because they know they’ll save way more than that on groceries, electronics, and everything else.
- Because renewal rates stay above 90% (91.4% in the U.S. and Canada last quarter), revenue is insanely predictable.
- Predictable high-margin cash flow lets management invest in lower prices → more traffic → more members → even lower prices.
- Rinse and repeat for forty years.
Warren Buffett once said his favorite holding period is “forever.” Costco is the closest thing retail has to a forever stock.
Yes, the Multiple Looks Scary—Until You Actually Do the Math
Right now the stock trades around 52 times trailing earnings and roughly 48 times next year’s estimates. On the surface, that’s nosebleed territory.
But here’s where it gets interesting. Because membership fees grow so reliably (up 7.5% last quarter), and because Costco keeps opening new warehouses at a steady 20–25 per year pace, the earnings power of each share keeps marching higher almost regardless of economic conditions.
Over the past decade Costco has compounded earnings at about 13–14% annually. If that continues—and there’s zero evidence it won’t—the current P/E actually looks reasonable when you run a simple DCF model out fifteen or twenty years.
In my experience, investors who fixate on the headline multiple almost always miss the forest for the trees with Costco. The stock has literally never been cheap on a trailing P/E basis in the last twenty-five years, yet it’s up 4,000%+ in that same period.
What Thursday’s “Weak” Numbers Actually Told Us
U.S. comparable sales in November rose 5.0%, down slightly from October’s 5.4%. E-commerce growth slowed to 9.8% from 14.5%. Cue the dramatic headlines.
Except… global comparable sales actually accelerated to 6.9% from 6.6% the prior month. Traffic remains strong, average transaction sizes are growing, and renewal rates are still rock-solid. In other words, the underlying business is completely fine.
More importantly, management continues to execute the same playbook that’s worked since the 1980s: keep prices low, treat employees well (starting wage now $19/hr), and let the flywheel spin.
How Costco Stacks Up Against the Rest of Retail
Let’s put this in perspective with a quick comparison:
| Company | 10-Year Total Return | Operating Margin | ROIC |
| Costco | ~650% | 3.5% | 22% |
| Walmart | ~280% | 4.0% | 13% |
| Target | ~220% | 5.4% | 12% |
| Amazon (retail segment) | N/A | ~6% | Varies |
Notice anything? Costco generates lower operating margins than almost everyone yet crushes them on return on invested capital and total shareholder return. That’s the membership moat at work.
The One Risk Everyone Keeps Missing
If I had to pick the biggest actual risk to Costco over the next decade, it isn’t competition from Walmart or Amazon. It’s succession.
Craig Jelinek retired last year after an incredible run as CEO. New CEO Ron Vachris has been with the company since 1982 and was Jelinek’s hand-picked successor, but leadership transitions at culture-driven companies are always the moment where things can go sideways. So far, so good—Vachris sounds exactly like every other Costco CEO in history when he talks about keeping prices low and employees happy.
Keep an eye on employee turnover numbers and wage growth relative to peers. As long as Costco continues paying significantly above minimum wage and treating workers well, the culture stays intact and the moat stays wide.
So Do You Buy the Dip?
Here’s where Cramer and I are completely aligned: not yet.
The market is still overbought coming into December, and Costco rarely gives you a truly screaming bargain. I’d love to add below $850 (it closed around $998 yesterday), but I’m not holding my breath.
That said, every single time this stock has looked “expensive” for the last thirty years, expensive turned out to be cheap in hindsight. If you’re a long-term investor with a horizon measured in decades—not days—Costco remains one of the highest-quality compounding machines on the planet.
Sometimes the best investing advice is also the simplest: when someone with Jim Cramer’s track record calls something one of the greatest investments of all time, you don’t argue.
You just listen.
(Disclosure: No position in Costco at the time of writing, but it’s permanently on my watchlist and has been in client accounts in the past. Always do your own research—past performance is no guarantee of future results, etc.)
