Costco Wholesale Corporation
COST · Retail
Operates membership warehouse clubs. Earns a large share of its profit from annual membership fees while keeping product margins low.
Model built Oct 6, 2026 · latest annual filing FY2026 · figures in USD
Assumptions
Start from
Years 1-5
Average per year
Starting: 7.5%
Operating profit as % of revenue, average
Starting: 4.0%
Capex as % of revenue, average
Starting: 2.2%
The long run
Growth fades to this by year 10, then continues forever
Starting: 3.0%
Profit earned on each dollar reinvested after year 5. Sets how much capex growth needs
Starting: 20.3%
The yearly return you require for the risk
Starting: 9.6%
Value per share
10 years of cash flows plus a value for everything after, all discounted to today.
Starting model (base)
$356
62% of this value comes from after year 10.
-64%
Arithmetic only, not a recommendation.What the price implies: buying at $992 earns about 5.4% a year if these cash flows play out, compared with the 9.6% discount rate.
Revenue and free cash flow
Last 5 years reported (SEC filings), then 10 years projected: years 1-5 from the assumptions, years 6-10 fading to the long run.
Projected free cash flow = operating profit after tax + depreciation - capex - working capital. Reported free cash flow = operating cash flow - capex, so the two are close but not identical.
Where the starting numbers come from
The years 1-5 assumptions were set by AI using the company's SEC filings, its own guidance and judgment about what is one-off. The reasoning for each line is under the i next to it. They are a starting point to react to, not a view. Compare them with what actually happened:
| Assumption | Starting (yrs 1-5 avg) | Reported (5 years to FY2026) |
|---|---|---|
| Revenue growth | 7.5% | 9.1% a year |
| Operating margin | 4.0% | 3.6% average |
| Capex % revenue | 2.2% | 1.9% average |
- Years 6-10 are calculated, not guessed: growth slides from the year-5 rate (6.5%) down to long-term growth (3.0%); margin and depreciation stay at year-5 levels; capex moves from 2.1% of revenue to 1.4%, which is depreciation plus what it takes to keep growing.
- Return on new invested capital (RONIC) 20%: what the years 1-5 assumptions themselves imply (extra after-tax operating profit by year 5 divided by the extra investment made to get there), kept between the discount rate and 100%.
- Discount rate 9.6%: cost of equity = risk-free rate 5.29% (US 10-year Treasury) + beta 0.88 x equity risk premium 5.0% = 9.7%; blended with cost of debt 2.6% after tax at 1% debt weight.
- Historical figures: SEC EDGAR annual filings (10-K). Share count and net debt from the latest filing used for the model.