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Costco (COST) Gains But Lags Market: What You Should Know

In the latest trading session, Costco (COST) closed at $227.68, marking a +1.41% move from the previous day. This move lagged the S&P 500's daily gain of 2.15%. At the same time, the Dow added 2.17%, and the tech-heavy Nasdaq gained 2.89%.

Prior to today's trading, shares of the warehouse club operator had lost 3.23% over the past month. This has was narrower than the Retail-Wholesale sector's loss of 9.79% and the S&P 500's loss of 5.16% in that time.

COST will be looking to display strength as it nears its next earnings release, which is expected to be December 13, 2018. In that report, analysts expect COST to post earnings of $1.60 per share. This would mark year-over-year growth of 17.65%. Meanwhile, our latest consensus estimate is calling for revenue of $34.24 billion, up 7.66% from the prior-year quarter.

COST's full-year Zacks Consensus Estimates are calling for earnings of $7.70 per share and revenue of $151.89 billion. These results would represent year-over-year changes of +12.74% and +7.28%, respectively.

Any recent changes to analyst estimates for COST should also be noted by investors. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.25% lower. COST currently has a Zacks Rank of #3 (Hold).

Digging into valuation, COST currently has a Forward P/E ratio of 29.16. This represents a premium compared to its industry's average Forward P/E of 22.54.

We can also see that COST currently has a PEG ratio of 2.86. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Retail - Discount Stores was holding an average PEG ratio of 1.68 at yesterday's closing price.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 29, which puts it in the top 11% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow COST in the coming trading sessions, be sure to utilize Zacks.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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