Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Costco Wholesale Corp. (NASDAQ:COST)

Paying users zone. Data is hidden behind: .

  • Get 1-month access to Costco Wholesale Corp. for $19.99, or

  • get full access to the entire website for at least 3 months from $49.99.


We accept:

Visa Mastercard American Express Maestro Discover JCB PayPal Apple Pay Google Pay
Verified by Visa MasterCard SecureCode American Express SafeKey

This is a one-time payment. There is no automatic renewal.

Present Value of Free Cash Flow to Equity (FCFE)

Intermediate level

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company’s asset base.


Intrinsic Stock Value (Valuation Summary)

Costco Wholesale Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel LibreOffice Calc
Year Value FCFEt or Terminal value (TVt) Calculation Present value at
01 FCFE0
1 FCFE1 = × (1 + )
2 FCFE2 = × (1 + )
3 FCFE3 = × (1 + )
4 FCFE4 = × (1 + )
5 FCFE5 = × (1 + )
5 Terminal value (TV5) = × (1 + ) ÷ ()
Intrinsic value of Costco Wholesale Corp.’s common stock
 
Intrinsic value of Costco Wholesale Corp.’s common stock (per share)
Current share price

Based on: 10-K (filing date: 2020-10-07).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk of Costco Wholesale Corp.’s common stock βCOST
 
Required rate of return on Costco Wholesale Corp.’s common stock3 rCOST

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rCOST = RF + βCOST [E(RM) – RF]
= + []
=


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Costco Wholesale Corp., PRAT model

Microsoft Excel LibreOffice Calc
Average Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Selected Financial Data (US$ in millions)
Cash dividends declared
Net income attributable to Costco
Net sales
Total assets
Total Costco stockholders’ equity
Financial Ratios
Retention rate1
Profit margin2
Asset turnover3
Financial leverage4
Averages
Retention rate
Profit margin
Asset turnover
Financial leverage
 
FCFE growth rate (g)5

Based on: 10-K (filing date: 2020-10-07), 10-K (filing date: 2019-10-11), 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14).

2020 Calculations

1 Retention rate = (Net income attributable to Costco – Cash dividends declared) ÷ Net income attributable to Costco
= () ÷ =

2 Profit margin = 100 × Net income attributable to Costco ÷ Net sales
= 100 × ÷ =

3 Asset turnover = Net sales ÷ Total assets
= ÷ =

4 Financial leverage = Total assets ÷ Total Costco stockholders’ equity
= ÷ =

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × × =


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × ( × ) ÷ ( + ) =

where:
Equity market value0 = current market value of Costco Wholesale Corp.’s common stock (US$ in millions)
FCFE0 = the last year Costco Wholesale Corp.’s free cash flow to equity (US$ in millions)
r = required rate of return on Costco Wholesale Corp.’s common stock


FCFE growth rate (g) forecast

Costco Wholesale Corp., H-model

Microsoft Excel LibreOffice Calc
Year Value gt
1 g1
2 g2
3 g3
4 g4
5 and thereafter g5

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= + () × (2 – 1) ÷ (5 – 1) =

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= + () × (3 – 1) ÷ (5 – 1) =

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= + () × (4 – 1) ÷ (5 – 1) =