Costco Wholesale Corporation [NASDAQ: COST]: A sustained bullish run since 31st May 2019, saw Costco close Monday’s trading at a 35-year high, closing the day at $261.43. This bullish rally followed a series of strong figures relating to the company’s bottom-line. For instance, Q3 results came out strong, with total revenues hitting $34.74 billion. This represents a 7% increase, and an indicator that the company’s position in the retail space is strengthening.
On top of that, the company’s net profits, a key indicator of company strength, stood at $906 million in Q3, representing an increase of 21%. Other positive Q3 news that has added to the bullish sentiment includes the EPS, which rose to $2.05, $0.98 higher than the previous year.
The company’s sales in the U.S, one of the company’s most important markets have also been getting better. In Q3, sales in the U.S rose by 7%. Internationally, the company experienced some weakness due to a strong dollar, but it still recorded growth. Overall, Q3 sales rose by 5.5%. Considering the geo-political challenges in the global markets at this point, these numbers are a positive indicator to Costco’s strong position in the market.
Besides these numbers, the company continues to record growth in e-commerce, which is crucial for retail sector growth at this point. On a year-on-year basis, Costco’s e-commerce business has grown by 22%. This is an indicator that, the company’s market presence is strengthening, even in the face of competition from e-commerce giants such as Amazon.
Other positive indicators for the company include its strong cash position. Costco has total operating cash flows of $5.6 billion and a levered free cash flow of $2.11 billion. Costco’s management is also very efficient in how it allocates the company’s resources. Not only does this reflect in the company’s strong revenue numbers, but also in its return on equity. The company has a return on equity of 26.75% and a return on assets of 7.08%.
From a look at the charts, Costco looks set to continue its bullish trend, when markets open. On the daily charts, it is gaining bullish momentum after a slight correction to $260.92 on Monday’s trading. If it pushes above yesterday’s high at $262.01 when markets open, then there will be a probability that it could trade in the green all through the day. This bullish trend is confirmed on the daily chart where Costco is in a bullish trend, with key support at $246.84 on the 50-day MA.