Costco Wholesale Corp. (NASDAQ:COST)

The financial data reveals several key trends in the company's profitability and capital efficiency over the examined periods. Net operating profit after taxes (NOPAT) has generally shown an upward trajectory, increasing from $4,254 million in 2020 to an expected $7,834 million in 2025. However, there is a noticeable dip in 2023 where NOPAT decreased to $5,694 million from $6,421 million in 2022, before resuming an upward trend thereafter.

Invested capital exhibited some fluctuations, starting at $29,043 million in 2020, slightly decreasing to $28,508 million in 2021, and then rising steadily to a projected $37,996 million in 2025. This growth in invested capital suggests ongoing capital deployment, with a marked increase particularly noted between 2024 and 2025.

The cost of capital has slightly increased over time, moving from 12.18% in 2020 to 12.67% by 2024 and remaining stable thereafter. This gradual increase in cost implies a modestly higher hurdle rate for the company's investments.

Despite the rise in invested capital and cost of capital, economic profit has improved significantly, growing from $716 million in 2020 to an anticipated $3,020 million in 2025. The economic profit peaked in 2024 at $2,853 million, after a drop in 2023 to $1,329 million, mirroring the dip seen in NOPAT.

Overall, the data indicates strong financial performance with consistent growth in value creation, notwithstanding a temporary setback in 2023. The increase in invested capital is aligned with higher profits and economic profit, suggesting effective capital management and value generation that outpaces the rising cost of capital.

Net Operating Profit After Taxes (NOPAT)

Generally rising with a dip in 2023, followed by continued growth.

Invested Capital

Fluctuated slightly before increasing steadily, indicating growing capital deployment.

Cost of Capital

Gradually increased, stabilizing at 12.67% from 2024 onward.

Economic Profit

Strong growth overall with a decrease in 2023, reflecting fluctuations in operating performance but ultimately showing improved value creation.

Net Income Attributable to Costco

The net income showed a consistent upward trend over the six-year period. Starting at 4,002 million USD, it increased steadily each year, reaching 8,099 million USD in the latest period. The largest year-over-year growth appeared from the 2023 to 2024 period, with an increase of approximately 1,075 million USD. Overall, net income approximately doubled from the first to the last reported year, reflecting strong profitability growth.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a generally increasing pattern as well, starting at 4,254 million USD in the earliest period and rising to 7,834 million USD in the most recent year. There was a slight deviation from the upward trend between 2022 and 2023, where NOPAT decreased from 6,421 million USD to 5,694 million USD before resuming growth. The recovery that followed saw a notable increase to 7,032 million USD and then to 7,834 million USD. This suggests a temporary operational challenge was overcome, leading to renewed profitability improvements.

General Observations

Both net income and NOPAT exhibited significant growth over the examined period, reinforcing a positive operational and financial trajectory. The temporary dip in NOPAT suggests some operational or cost-related challenges in the 2023 fiscal year, yet the strong rebound indicates effective management response or favorable market conditions. The steadier growth in net income compared to the fluctuating pattern of NOPAT could suggest impacts of non-operating factors or variations in tax effects during the period.

The financial data indicates a consistent upward trend in both the provision for income taxes and cash operating taxes over the analyzed period. This upward trajectory suggests increasing profitability or taxable income, requiring higher tax allocations.

Provision for Income Taxes

The provision for income taxes has increased from $1,308 million in 2020 to $2,719 million in 2025. This steady growth reflects a compounded annual increase, highlighting the company's growing tax liability over the years. The year-over-year increases range between approximately 17% to 24%, showing sustained expansion without volatility.

Cash Operating Taxes

Cash operating taxes also show a consistent rise from $1,246 million in 2020 to $2,750 million in 2025. Notably, cash operating taxes slightly exceed the provision for income taxes, which could indicate timing differences or tax payment strategies. The year-over-year growth in cash operational taxes aligns closely with the provision, reinforcing the narrative of increased cash outflows related to tax expenses.

Overall, the data reveals a parallel and proportionate increase in tax provisioning and payments, reflecting robust business performance and likely higher earnings. The absence of any decline or irregularity in these amounts suggests stable tax management and continuous financial growth throughout the period under review.

Total reported debt & leases

The total reported debt and leases exhibit a generally declining trend over the observed periods. Starting from approximately $11.1 billion, the amount slightly increased to around $11.4 billion in the second year, then consistently decreased in the subsequent years, reaching approximately $9.9 billion in the latest period. This suggests a gradual reduction in leverage or obligations related to debt and leases over time.

Total Costco stockholders’ equity

Stockholders' equity demonstrates significant growth across the years. There is an initial slight decline from about $18.3 billion to $17.6 billion, followed by a substantial increase to over $20.6 billion in the third period. This upward trajectory continues more markedly in the following years, reaching nearly $29.2 billion in the most recent period. The growth in equity indicates strengthening financial stability and retained earnings accumulation.

Invested capital

Invested capital shows a consistent upward trend, rising from approximately $29.0 billion at the beginning of the period to nearly $38.0 billion in the latest year. Despite a slight dip in one of the middle years, the general movement is positive, suggesting ongoing investment in the company's operations and assets. This increase in invested capital aligns with the growth observed in stockholders’ equity, reflecting expansion and reinvestment activities.

Economic Profit

Over the analyzed periods, economic profit exhibited a generally upward trajectory with some volatility. Starting at 716 million US dollars, it increased substantially to reach 1,783 million in the following year and further rose to 2,493 million. However, a decline occurred in the subsequent year, dropping to 1,329 million before rebounding significantly to 2,853 million and slightly further to 3,020 million. This pattern indicates episodic fluctuations but an overall improvement in value creation over the timeline.

Invested Capital

Invested capital showed a steady growth trend with minor fluctuations. From an initial value of 29,043 million US dollars, it marginally decreased to 28,508 million before increasing to 31,671 million. The upward trend continued with a rise to 34,903 million, followed by a slight decline to 32,993 million, and then a notable increase to 37,996 million. This indicates consistent reinvestment or expansion activities, with some periods of capital reduction or asset optimization.

Economic Spread Ratio

The economic spread ratio demonstrated similar volatility to economic profit, reflecting changing returns relative to invested capital. Initially at 2.47%, the ratio increased sharply to 6.25% and further to 7.87%, showcasing improved efficiency in generating returns. A subsequent decrease to 3.81% was followed by a pronounced increase to 8.65% and a slight decline to 7.95%. These fluctuations suggest varying profitability conditions, with recent periods reflecting strong economic value generation relative to invested capital.

Overall Insights

The data reveals a company that is generally improving its economic profit and maintaining growth in invested capital. The fluctuations in economic profit and economic spread ratio point to periods of both operational challenges and strong performance. Notably, the economic spread ratio's upward trend in the latest periods indicates enhanced efficiency in capital utilization. The interplay of these metrics suggests a dynamic operational environment with a positive long-term outlook on value creation and capital management.

Economic Profit

Economic profit exhibited an overall increasing trend over the analyzed period, rising from 716 million USD in 2020 to 3020 million USD in 2025. Despite this general upward movement, there was a notable dip in 2023, where the value decreased significantly to 1329 million USD from the previous year's 2493 million USD. Following this decline, the metric rebounded strongly in 2024 and continued to increase in 2025.

Net Sales

Net sales consistently increased each year, growing from 163,220 million USD in 2020 to 269,912 million USD in 2025. The growth was steady without any reversals or declines, indicating a stable expansion in sales revenue over the six-year period.

Economic Profit Margin

The economic profit margin showed a variable pattern across the years. Starting at 0.44% in 2020, it increased to a peak of 1.12% in 2022, nearly doubling within two years. However, in 2023, the margin decreased to 0.56%, reflecting a weakening in profitability relative to sales. This decline was temporary as the margin recovered to 1.14% in 2024 and slightly decreased to 1.12% in 2025, maintaining a relatively high level compared to the earlier years.