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

Costco Wholesale Corp. (NASDAQ:COST)

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Economic Value Added (EVA)

Advanced level

Economic Profit

Costco Wholesale Corp., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

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).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Costco Wholesale Corp.’s economic profit increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

Net Operating Profit after Taxes (NOPAT)

Costco Wholesale Corp., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Net income attributable to Costco
Deferred income tax expense (benefit)1
Increase (decrease) in LIFO reserve2
Increase (decrease) in equity equivalents3
Interest expense
Interest expense, operating lease liability4
Adjusted interest expense
Tax benefit of interest expense5
Adjusted interest expense, after taxes6
(Gain) loss on marketable securities
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income7
Investment income, after taxes8
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

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).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in LIFO reserve. See details »

3 Addition of increase (decrease) in equity equivalents to net income attributable to Costco.

4 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

5 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

6 Addition of after taxes interest expense to net income attributable to Costco.

7 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

8 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Costco Wholesale Corp.’s NOPAT increased from 2018 to 2019 and from 2019 to 2020.

Cash Operating Taxes

Costco Wholesale Corp., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Provision for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

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).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Costco Wholesale Corp.’s cash operating taxes decreased from 2018 to 2019 but then increased from 2019 to 2020 not reaching 2018 level.

Invested Capital

Costco Wholesale Corp., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Current portion of long-term debt
Long-term debt, excluding current portion
Operating lease liability1
Total reported debt & leases
Total Costco stockholders’ equity
Net deferred tax (assets) liabilities2
LIFO reserve3
Equity equivalents4
Accumulated other comprehensive (income) loss, net of tax5
Noncontrolling interests
Adjusted total Costco stockholders’ equity
Construction in progress6
Short-term investments7
Invested capital

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).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of LIFO reserve. See details »

4 Addition of equity equivalents to total Costco stockholders’ equity.

5 Removal of accumulated other comprehensive income.

6 Subtraction of construction in progress.

7 Subtraction of short-term investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Costco Wholesale Corp.’s invested capital increased from 2018 to 2019 and from 2019 to 2020.

Cost of Capital

Costco Wholesale Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

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

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2019-10-11).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 25.60%) =
Operating lease liability4 ÷ = × × (1 – 25.60%) =
Total:

Based on: 10-K (filing date: 2018-10-26).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2017-10-18).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2016-10-12).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current portion3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2015-10-14).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Costco Wholesale Corp., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Amazon.com Inc.
Dollar General Corp.
Home Depot Inc.
Lowe’s Cos. Inc.
Target Corp.
TJX Cos. Inc.
Walmart Inc.

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).

1 Economic profit. See details »

2 Invested capital. See details »

3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Costco Wholesale Corp.’s economic spread ratio improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.

Economic Profit Margin

Costco Wholesale Corp., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Aug 30, 2020 Sep 1, 2019 Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Net sales
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Amazon.com Inc.
Dollar General Corp.
Home Depot Inc.
Lowe’s Cos. Inc.
Target Corp.
TJX Cos. Inc.
Walmart Inc.

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).

1 Economic profit. See details »

2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Costco Wholesale Corp.’s economic profit margin improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.