Costco Wholesale Corp. ($COST): A Discounted Cash Flow (DCF) Approach

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1. Introduction

Costco Wholesale Corp. (COST) is an exceptional business, admired for its robust business model and consistent financial performance. For those of us who love deep-diving into business models, analyzing Costco is a complete pleasure. It’s a prime example of operational excellence: every part of the company functions seamlessly, with great management that is well-aligned with stakeholders. From a financial perspective, the company has demonstrated steady growth, profitability, and financial health, making it a standout in the retail sector. There simply aren’t enough superlatives to describe how well-run this company is.

However, from an investment perspective, a great company does not always equate to a great investment. Valuation is crucial, and even the best businesses can be overpriced. This article aims to provide a brief overview of Costco's business model and financial evolution before quickly shifting focus to valuation. Using a Discounted Cash Flow (DCF) model, I…