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Key Points
Costco's durable earnings growth should continue lifting the share price higher over time.
At a price-to-earnings ratio of 47.2, the market views this business quite favorably.
Costco (NASDAQ: COST) shares hit their all-time high price of $1,094.32 in May. They have fallen 14% since then (as of July 20). Investors are hoping that the warehouse club operator can bounce back sooner rather than later.
Is $1,100 the next stop for this retail stock?
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The timing is unknown
Shares would need to rise 17% to reach $1,100, which would establish a new record. Based on the stock's 126% trailing five-year return, this gain isn't out of the question. That's because this is a high-quality business with durable earnings growth.
The only unknown is timing. Shares could hit that price this year, next year, or after. No one has a clue.
Investors shouldn't expect the stock to go straight up and to the right starting today. Shares can certainly fall in the near term. That's the volatile nature of the market.
The valuation is also a key variable to keep in mind. Costco stock is notoriously expensive. It trades at a price-to-earnings ratio of 47.2. This reveals the market's lofty expectations.
Investors should think twice about buying shares right now, as waiting for a sizable pullback is the best course of action. At the end of the day, it's worth remembering that this is a company with strong fundamentals that should at least be on your watch list.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
