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published in Blogs
Sep 28, 2019

Indicators somewhat mixed ahead of Costco’s earnings report

Wholesale membership retailer Costco (Nasdaq: COST) is scheduled to report fiscal fourth quarter and year-end earnings on October 3. From a technical perspective the stock has been performing really well since the December low. From a fundamental perspective, the company has some indicators that are sub-par and could hurt the stock going forward.

Let’s look at the chart first. We see the upward trend over the last nine months and we see how a pretty clearly defined trend channel has formed in the last seven months. The stock is just above the lower rail at this time and the lower rail is in close proximity to the 50-day moving average. The stock used the 50-day as support back in August and could do so again.

The daily stochastic readings are in oversold territory and have been for a few days now, but the indicators made a bullish crossover on September 25. If you look back over the last nine months, this is only the second time the indicators have been in oversold territory since December.

The Tickeron Price Growth Rating for Costco is 18 and that indicates outstanding price growth. The stock price has grown at a higher rate over the last 12 months compared to S&P 500 index constituents. A rating of 1 points to highest price growth (largest percent return) while a rating of 100 points to lowest price growth (smallest percent return).

The Relative Strength Rating from Investor’s Business Daily is a 90 and that means Costco’s stock price has performed better than 90% of the stocks in IBD’s database.

Turning our attention to the fundamental outlook we see some indicators that are well above average and others that are below average. Costco’s earnings growth has been decent with an average rate of 15% per year over the last three years. Earnings grew by 11% in the third quarter and they are expected to grow by 18% for the year as a whole.

Another indicator that is above average is the return on equity which is at 25.6%. Unfortunately the company’s profit margin is below average at 3.1% and the sales growth is below average as well. Over the last three years sales have grown at a rate of 9% and they were up by 7% in the third quarter.

If we combine the sales growth, the profit margin, and the return on equity, we get the SMR rating from Tickeron. That indicator for Costco is 76. This indicates weak sales and an unprofitable business model. The SMR rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.

From a valuation standpoint, Costco seems to be priced relatively well at this time. The Tickeron Valuation Rating is at 9 and that indicates that the company is seriously undervalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization.

Looking at the sentiment indicators for Costco we see that analysts are a little more pessimistic toward the stock than the average company. There are 27 analysts covering the stock at this time with 16 “buy” ratings, nine “hold” ratings, and two “sell” ratings. This puts the buy percentage at 59.3% and that is slightly below the 65% to 75% average range.

The short interest ratio is slightly below average at 1.73. This is the lowest reading for the ratio over the past year and that indicates that short sellers are becoming more optimistic toward Costco.

If we look at all three analysis categories—fundamental, sentiment, and technical—we see that the fundamentals and the sentiment are mixed while the technical indicators are pretty strong. This could be an interesting earnings report for investors.

Related Ticker: COST

COST in downward trend: price may drop because broke its higher Bollinger Band on February 01, 2024

COST broke above its upper Bollinger Band on February 01, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options. The A.I.dvisor looked at 46 similar instances where the stock broke above the upper band. In of the 46 cases the stock fell afterwards. This puts the odds of success at .

Price Prediction Chart

Technical Analysis (Indicators)

Bearish Trend Analysis

The 10-day RSI Indicator for COST moved out of overbought territory on February 21, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 58 similar instances where the indicator moved out of overbought territory. In of the 58 cases, the stock moved lower in the following days. This puts the odds of a move lower at .

The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 59 cases where COST's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .

The Moving Average Convergence Divergence Histogram (MACD) for COST turned negative on February 13, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 43 similar instances when the indicator turned negative. In of the 43 cases the stock turned lower in the days that followed. This puts the odds of success at .

Following a 3-day decline, the stock is projected to fall further. Considering past instances where COST declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

Bullish Trend Analysis

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where COST advanced for three days, in of 391 cases, the price rose further within the following month. The odds of a continued upward trend are .

The Aroon Indicator entered an Uptrend today. In of 402 cases where COST Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 46, placing this stock better than average.

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. COST’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (12.270) is normal, around the industry mean (10.656). COST's P/E Ratio (49.286) is considerably higher than the industry average of (23.574). Projected Growth (PEG Ratio) (5.145) is also within normal values, averaging (3.133). Dividend Yield (0.006) settles around the average of (0.023) among similar stocks. P/S Ratio (1.308) is also within normal values, averaging (1.224).

Notable companies

The most notable companies in this group are Walmart (NYSE:WMT), Costco Wholesale Corp (NASDAQ:COST), Target Corp (NYSE:TGT), Dollar Tree (NASDAQ:DLTR), Dollar General Corp (NYSE:DG), Big Lots (NYSE:BIG).

Industry description

Companies in the discount stores industry specialize in offering substantial discounts on a vast array of retail products. Some companies in this industry also operate general merchandise warehouse clubs. Products sold at discount stores are typically similar to those of any department store, but the pricing of the goods is generally much lower (and hence the name “discount”). Think Dollar General Corporation, Dollar Tree, Inc. and Five Below, Inc. Many discount stores target low-income households and/or price-sensitive consumers as their potential market. Discount stores’ profitability could hinge on factors like competitive pricing, sufficient locations, healthy revenue per square foot, and effective advertisement. These store operators could have an edge over other retailers during financial crises or recessions, when many consumers could be looking for less expensive alternatives.

Market Cap

The average market capitalization across the Discount Stores Industry is 66.93B. The market cap for tickers in the group ranges from 1.78K to 467.64B. WMT holds the highest valuation in this group at 467.64B. The lowest valued company is TUEMQ at 1.78K.

High and low price notable news

The average weekly price growth across all stocks in the Discount Stores Industry was 2%. For the same Industry, the average monthly price growth was 2%, and the average quarterly price growth was 7%. BIG experienced the highest price growth at 7%, while TBBB experienced the biggest fall at -6%.

Volume

The average weekly volume growth across all stocks in the Discount Stores Industry was 18%. For the same stocks of the Industry, the average monthly volume growth was 12% and the average quarterly volume growth was -7%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 48
P/E Growth Rating: 55
Price Growth Rating: 46
SMR Rating: 43
Profit Risk Rating: 45
Seasonality Score: -18 (-100 ... +100)
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A.I.Advisor
published price charts
A.I. Advisor
published General Information

General Information

a company which sells goods through membership warehouses

Industry DiscountStores

Profile
Fundamentals
Details
Industry
Specialty Stores
Address
999 Lake Drive
Phone
+1 425 313-8100
Employees
316000
Web
https://www.costco.com
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COST and

Correlation & Price change

A.I.dvisor indicates that over the last year, COST has been loosely correlated with WMT. These tickers have moved in lockstep 49% of the time. This A.I.-generated data suggests there is some statistical probability that if COST jumps, then WMT could also see price increases.

1D
1W
1M
1Q
6M
1Y
5Y
Ticker /
NAME
Correlation
To COST
1D Price
Change %
COST100%
-0.37%
WMT - COST
49%
Loosely correlated
-1.23%
BJ - COST
35%
Loosely correlated
+0.67%
DLTR - COST
29%
Poorly correlated
-0.59%
PSMT - COST
27%
Poorly correlated
+1.39%
TGT - COST
22%
Poorly correlated
-0.73%
More
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