Implied Price
$679
vs $971.87 market
−30.1% to fair value
Enterprise Value
$296B
DCF-derived EV
EV/EBITDA: 23.1x
Revenue CAGR
6.1%
FY2025–2035E
Warehouse-driven
FY2025 EBITDA
$12.8B
4.65% margin
↑ from 4.53% (2024)
Membership Rev
$5.3B
FY2025 · 81% renewal
+10.3% YoY
ROIC
12.4%
FY2025 output
vs 7.58% WACC
Scenario Analysis
Bear Case
$573.77
−40.96% vs market
Rev CAGR5.66%
EBIT Margin (Terminal)3.55%
Implied EV$249.2B
TGR3.0%
Base Case
$679.45
−30.09% vs market
Rev CAGR6.06%
EBIT Margin (Terminal)3.84%
Implied EV$296.2B
TGR3.0%
Bull Case
$780.63
−19.68% vs market
Rev CAGR6.55%
EBIT Margin (Terminal)4.13%
Implied EV$341.2B
TGR3.0%
Revenue Architecture
Warehouse-Driven Revenue Build (US$M)
| Driver | FY2021 | FY2022 | FY2023 | FY2024 | FY2025A | FY2026E | FY2027E | FY2030E | FY2035E |
|---|---|---|---|---|---|---|---|---|---|
| NET SALES — Warehouse Model | |||||||||
| Warehouse Count | 815 | 838 | 861 | 890 | 914 | 944 | 974 | 1,085 | 1,197 |
| Warehouses Added | 20 | 23 | 23 | 29 | 24 | 30 | 30 | 28 | 28 |
| Avg Sales / Warehouse ($M) | 238.6 | 269.5 | 279.8 | 285.1 | 299.2 | 316.9 | 334.1 | 393.1 | 449.4 |
| % Growth / Warehouse | 15.3% | 13.0% | 3.8% | 1.9% | 5.0% | 5.9% | 5.4% | 3.4% | 3.4% |
| Total Net Sales | $192,052 | $222,730 | $237,710 | $249,625 | $269,912 | $299,173 | $325,377 | $426,601 | $537,978 |
| % Growth | 17.7% | 16.0% | 6.7% | 5.0% | 8.1% | 10.8% | 8.8% | 6.1% | 5.9% |
| MEMBERSHIP FEES — Member × Average Fee | |||||||||
| Total Members (M) | 61.7 | 65.8 | 71.0 | 76.2 | 81.0 | 86.3 | 91.9 | 114.9 | 142.3 |
| Member Growth % | 6.2% | 6.6% | 7.9% | 7.3% | 6.3% | 6.5% | 6.5% | 5.5% | 5.5% |
| Avg Fee / Member ($) | $62.84 | $64.19 | $64.51 | $63.36 | $65.86 | $70.86 | $74.36 | $81.25 | $82.25 |
| Total Membership Fees | $3,877 | $4,224 | $4,580 | $4,828 | $5,323 | $6,113 | $6,832 | $9,335 | $11,707 |
| % Growth | 9.5% | 9.0% | 8.4% | 5.4% | 10.3% | 14.8% | 11.8% | 7.1% | 5.5% |
| TOTAL REVENUE | $195,929 | $226,954 | $242,290 | $254,453 | $275,235 | $305,285 | $332,209 | $435,936 | $549,685 |
Income Statement Bridge (FY2025A)
Total Revenue
$275,235M
(-) COGS
($239,886M)
Gross Profit
$35,349M 13.1% margin
(-) OpEx
($24,966M)
EBIT
$10,383M 3.77%
(+) D&A
$2,426M
EBITDA
$12,809M 4.65%
(+) Interest Income
$589M
(-) Interest Expense
($154M)
(-) Taxes (25.1%)
($2,719M)
Net Income
$8,099M
CapEx Architecture (FY2025A: $5,498M)
Maintenance
$2,177M
39.6% of total
Growth
$1,065M
19.4% of total
Strategic & IT
$2,256M
41.0% of total
Strategic & IT CapEx projected at 8% annual growth through FY2035E — reflects e-commerce infrastructure and tech stack investment.
WACC Construction & DCF Output
WACC Derivation — Peer Unlevered Beta
| Peer | Debt/Capital | Tax Rate | Levered β | Unlevered β |
|---|---|---|---|---|
| Costco | 1.86% | 25.0% | 0.87 | 0.858 |
| Walmart | 3.96% | 25.0% | 0.60 | 0.582 |
| Target | 20.40% | 25.0% | 0.99 | 0.830 |
| Amazon | 2.42% | 25.0% | 1.44 | 1.414 |
| Median | 3.19% | 25.0% | 0.795 | 0.706 |
Cost of Equity
Risk-Free Rate4.54%
Equity Risk Premium4.46%
Levered Beta (re-levered)0.724
Cost of Equity7.77%
Cost of Debt
Pre-Tax Cost of Debt2.70%
Tax Rate25.0%
After-Tax Cost of Debt2.02%
Debt Weight3.19%
WACC (Equity-Weighted)
7.58%
EV → Equity Value Bridge
Σ PV of Unlevered FCF (FY26–35E)
$70,923M
PV of Terminal Value (75% weight)
$225,308M
Enterprise Value
$296,231M
TV as % of EV: 76.1% · TV/EBITDA check: 8.7x ✓
(+) Cash
$14,161M
(-) Total Debt
($8,173M)
Net Debt Position
Net Cash: $5,988M
Equity Value
$302,219M
Shares Outstanding
444.8M
Implied Price / Share
$679.45
MARKET PREMIUM ANALYSIS
Market trades at $971.87, a 43.0% premium to DCF base case ($679.45). This premium embeds Costco's unique moat: captive membership cash flows, nearly 93% renewal rates, and a flight-to-value consumer shift. At market price, implied EV/EBITDA is 33.3x vs peer median 17.7x.
Sensitivity Analysis
Toggle Sensitivity Table
Implied Share Price ($) · WACC (cols) vs Terminal Growth Rate (rows)
| TGR \ WACC | 9.58% | 9.08% | 8.58% | 8.08% | 7.58% | 7.08% | 6.58% | 6.08% | 5.58% |
|---|
Note: EBIT Margin sensitivity reflects relative ranges around base case EBIT trajectory
The model's EBIT margin is a function of Gross Margin compression from mix shift (lower-margin e-commerce growing faster than in-warehouse) offset by OpEx leverage as fixed SG&A is spread over a larger revenue base. Terminal EBIT margin of 3.84% is deliberately conservative vs current 3.77%, reflecting modest improvement from warehouse productivity rather than an aggressive margin re-rating.
Comparable Company Valuation & Football Field
EV/EBITDA Comps Table
| Company | Ticker | Mkt Cap ($M) | EV ($M) | EBITDA ($M) | EV/EBITDA | P/E |
|---|---|---|---|---|---|---|
| Costco PREMIUM | COST | $432,288 | $426,300 | $12,809 | 33.3x | 53.4x |
| Walmart | WMT | $953,655 | $983,942 | $44,028 | 22.3x | 43.6x |
| Target | TGT | $55,892 | $64,730 | $8,251 | 7.8x | 15.1x |
| Amazon | AMZN | $2,643,845 | $2,586,464 | $145,731 | 17.7x | 34.0x |
| Peer Median | — | — | — | — | 17.7x | 34.0x |
Implied Price by Methodology
PEER MEDIAN EV/EBITDA
$497.64
−48.8% vs market
HISTORICAL COST MULTIPLE (32x)
$908.05
−6.6% vs market
PREMIUM MULTIPLE (26.6x)
$753.19
−22.5% vs market
P/E METHOD
$619.80
−36.2% vs market
Football Field — Implied Price Range ($)
All methods anchored at $300 min / $1,100 max scale
Net Debt / EBITDA
0.47x
Interest Coverage
67.4x
FCF Yield (Mkt)
1.44%
FCF Yield (DCF)
2.06%
ROIC vs WACC
+4.8pp
Analyst Note — Why Every Valuation Method Shows a 20–50% Discount to Market
Costco's market price reflects a structural premium that no DCF or comps methodology can fully capture using standard mechanics. Three factors account for the persistent gap. First, membership fee economics are not EBITDA — the $5.3B in annual fee revenue is almost entirely recurring, near-100% margin, and commands a multiple closer to a SaaS business (~25-30x) than a retailer (~15x). Blending this into consolidated EBITDA systematically understates the value of the fee stream. Second, Costco's negative working capital flywheel (NWC averaging −$14B to −$35B across the forecast) means the business is structurally self-funding; suppliers effectively lend capital to Costco at zero cost, a feature the DCF partially captures via NWC changes but that the market prices as a quasi-permanent structural advantage. Third, the warehouse pipeline optionality (28 new clubs per year at each adding $300M+ in annual revenue) carries embedded option value not reflected in a static 10-year DCF. The bull case implies $780.63, still 20% below market, suggesting the market has priced in either significantly faster member growth, a material fee hike above model assumptions (next hike cycle likely FY2027–28 to $90+), or assigns a scarcity premium to the Costco membership model that falls outside standard DCF territory.