On the four Ms, Costco Wholesale earns 100 for management and 98 for moat. The management score rests on a return on invested capital of 18.6% and a gross margin of 12.8% — figures that describe a business turning capital into profit efficiently. Debt sits at 0.24x equity.
Three independent anchors set the price worth paying. Growth is modelled at 9.1% a year, the rate measured from the filings. The exit multiple assumed is 18.2x. That produces an intrinsic value of $297.87, a 10-CAP price of $254.76 and a payback time price of $307.95, with the value zone set at the highest of the three, $307.95. Today's price of $914.94 is 197% above it.
A wonderful business at the wrong price is still the wrong price. Costco Wholesale scores well on the business and poorly on the entry point, which is the most common shape in a long bull market.
| Price | $914.94 |
| Market cap | $405.8B |
| P/E ratio | 33.2x |
| Return on invested capital | 18.6% |
| Gross margin | 12.8% |
| Debt to equity | 0.24x |
| Free cash flow yield | 2.2% |
| Growth rate used | 9.1% |
| Growth rate measured | 9.0% |
| Exit multiple assumed | 18.2x |
| Company | Moat | Buy price |
| The Coca-Cola Company (KO) | 53 | $39.26 |
| Procter & Gamble (PG) | 42 | $71.15 |
| Philip Morris International (PM) | 47 | $93.52 |
| PepsiCo Inc. (PEP) | 42 | $80.52 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Costco Wholesale rather than accepting ours.