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Highly Valued Costco Is Still A Buy

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Costco (NASDAQ: COST) is by far the most richly valued of the major players in the membership club category. The stock is trading at 38X this year's and 35X next year's earnings compared to much lower valuations for its closest peers. The most directly comparable peer in our sphere of coverage is BJ's Wholesale Club. BJ's Wholesale Club is a much smaller operation but one that is growing very quickly and it trades at only 20X this year's earnings and 18.5X next year's earnings. Walmart, whose valuation includes the Sam's Club warehouse, trades at only 23 and 22 X earnings while Latin America-based PriceSmart trades at 24 and 23X earnings. But you get what you pay for. While the other stocks are all attractive investments in their own right, Costco is by far the best run and healthiest company of the lot. And it has double-digit gains in store for its share prices.

Costco's Q4 results proved that strong tailwinds continue to blow........

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