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Is it too late to buy Costco stock after a solid FQ1 beat?

on Dec 10, 2021
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  • Costco shares on Thursday edged slightly higher in the after-hours session.
  • The company reported strong fiscal first-quarter 2022 results after the close.
  • Costco outperformed analyst estimates on revenue, earnings and comparable sales.

On Thursday, Costco Wholesale Corporation (NASDAQ:COST) gained 1.15% in the after-hours session edging out the 1.09% decline in the regular session. The company announced its most recent quarterly results after the close, beating the consensus for analyst expectations on revenue and earnings. Costco also outperformed the Street forecast on comparable sales with a Y/Y growth of 9.8% compared to an estimate of 8.3%.

The company posted FQ1 non-GAAP earnings per share of $2.77, exceeding the average analyst estimate of $2.65. On the other hand, its GAAP EPS of $2.98 topped the expectation of $2.65, while revenue for the quarter increased by 16.5% from the same quarter last year to $50.36 billion, surpassing expectations by $610 million.

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Is Costco still a good bet?

From an investment perspective, Costco shares trade at a reasonable P/E ratio of 46.53 and forward P/E of 38.74. Therefore, although the stock is up more than 37% this year, it could still be an interesting option for value investors.

In addition, analysts expect its EPS to grow by 25% this year, before rising at an average annual rate of 11.74% next year. Therefore, the stock could also gain the attention of long-term growth investors.

Source – TradingView

Technically, Costco seems to have pulled back after finding the trendline resistance of a descending channel formation. As a result, the stock has recovered from overbought conditions, creating an opportunity to swoop on a potential rebound. 

Therefore, investors could target profits at about $543.58, or higher at $560.62, while $505.11 and $487.25 are crucial support zones.