Costco Wholesale Corp. (NASDAQ:COST)

The financial data indicates several noteworthy trends over the periods from 2019 to 2024. The Net Operating Profit After Taxes (NOPAT) displayed a general upward trend, rising from 3,979 million USD in 2019 to 7,032 million USD in 2024. There was a consistent increase except for a slight decline in 2023 compared to 2022, which suggests a temporary setback or adjustment during that year, followed by a significant recovery in 2024.

The Cost of Capital exhibited a gradual increase throughout the period, moving from 12.11% in 2019 to 12.52% in 2024. This steady rise indicates a slightly higher hurdle rate for investments, which could impact the valuation and investment decisions within the company.

Invested Capital grew substantially from 23,959 million USD in 2019 to a peak of 34,903 million USD in 2023 before falling slightly to 32,993 million USD in 2024. The growth implies continued investment to support operations and expansion, with the slight reduction at the end potentially reflecting asset sales, divestitures, or optimization of capital deployment.

Economic Profit revealed variability but an overall positive trend. Starting at 1,079 million USD in 2019, it dipped to 757 million USD in 2020, likely impacted by external or operational challenges during that year. Subsequently, it increased markedly to 2,538 million USD in 2022, then decreased to 1,380 million USD in 2023, before rising again to 2,901 million USD in 2024. This pattern highlights fluctuating efficiency in generating returns above the cost of capital but maintains consistent creation of shareholder value over time.

Summary of Trends

1. NOPAT shows strong growth with temporary decline in 2023, rebounding sharply in 2024.

2. Cost of Capital consistently increases, indicating rising capital expenses.

3. Invested Capital mostly increases, suggesting expansion investments, with slight reduction in the last year.

4. Economic Profit is volatile but generally improving, reflecting the company’s ability to generate returns above the cost of capital despite fluctuations.

Net income attributable to Costco

The net income demonstrates a consistent upward trend over the six-year period. Starting at 3,659 million USD in 2019, it increased steadily each year, reaching 7,367 million USD by 2024. The growth is particularly notable between 2023 and 2024, showing a substantial increase of approximately 17%. This pattern indicates continuous improvement in profitability and effective management in generating earnings for shareholders.

Net operating profit after taxes (NOPAT)

NOPAT also shows a general upward trajectory, reflecting enhanced operational efficiency and after-tax profitability. The figure rose from 3,979 million USD in 2019 to 7,032 million USD in 2024. However, a deviation from the growth trend is observed between 2022 and 2023, where NOPAT declined from 6,421 million USD to 5,694 million USD, representing a decrease of about 11%. Despite this dip, the metric recovered strongly in 2024, exceeding previous highs. This suggests a temporary operational challenge in 2023, followed by a robust rebound.

The financial data indicates a consistent upward trend in both the provision for income taxes and cash operating taxes over the six-year period examined.

Provision for income taxes

This item shows a steady increase each year, starting at 1,061 million US dollars in 2019 and rising to 2,373 million US dollars by 2024. The growth is relatively smooth and continuous, reflecting an increasing tax burden or improved profitability subject to taxation during this period.

Cash operating taxes

Similar to the provision for income taxes, cash operating taxes exhibit a continuous rise from 944 million US dollars in 2019 to 2,412 million US dollars in 2024. The increase each year is consistent with growing operational tax payments, slightly exceeding the provision figures each year, which might indicate timely cash outflows related to tax obligations.

The parallel progression of both tax-related metrics suggests a stable and possibly expanding operational base contributing to higher taxable income and ensuing tax payments. The close alignment between provision and cash operating taxes implies effective tax management with minimal discrepancies between accrued and paid taxes over the period.

The analysis of the annual financial data reveals several notable trends over the six-year period.

Total reported debt & leases

This liability metric shows a moderate fluctuation, beginning at $9,126 million in 2019, peaking in 2021 at $11,407 million, and then generally declining to $9,949 million by 2024. This suggests a strategy of managing and reducing debt levels following a peak in 2021, potentially improving the company's leverage position.

Total Costco stockholders’ equity

This equity measure exhibits a consistent upward trend overall. Starting at $15,243 million in 2019, it rises significantly to $25,058 million by 2023 before declining somewhat to $23,622 million in 2024. The growth in stockholders’ equity indicates accumulation of retained earnings and possible capital infusions over these years, although the slight decrease in the final year may warrant further review.

Invested capital

Invested capital mirrors the combined effect of liabilities and equity, showing an overall increases from $23,959 million in 2019 to a peak of $34,903 million in 2023, followed by a decrease to $32,993 million in 2024. This pattern reflects growth in the total capital invested in the business up to 2023, with some withdrawal or reduction in the most recent year.

Overall, the data suggests strengthened equity position alongside careful debt management, with a general trend of growth in invested capital that slightly recedes in the final year observed. These patterns could indicate strategic financial adjustments aimed at optimizing capital structure and supporting company growth.

Economic Profit

The economic profit exhibited notable fluctuations over the six-year period. Starting at 1,079 million US dollars in 2019, there was a decline to 757 million in 2020, followed by a strong recovery to 1,823 million in 2021. The upward trend continued with a peak of 2,538 million in 2022 before it decreased to 1,380 million in 2023. In 2024, economic profit reached its highest value in the series at 2,901 million US dollars, indicating improved profitability in the latest year.

Invested Capital

Invested capital showed an overall increasing trend with some variability. It rose from 23,959 million US dollars in 2019 to 29,043 million in 2020. Following a slight decrease to 28,508 million in 2021, invested capital climbed steadily to 31,671 million in 2022 and further to 34,903 million in 2023. A reduction to 32,993 million in 2024 was observed, suggesting a slight contraction or reallocation of invested resources after consistent growth in prior years.

Economic Spread Ratio

The economic spread ratio, which measures profitability relative to invested capital, displayed significant variability. It started at 4.5% in 2019, dropped sharply to 2.61% in 2020, then increased substantially to 6.4% in 2021 and further to 8.01% in 2022. A decline occurred in 2023 to 3.95%, followed by a strong recovery to the highest value of 8.79% in 2024. These fluctuations indicate changing efficiency in capital deployment and profitability generation across the years.

Overall Insights

The data reflects volatile economic profit and economic spread ratio, with periods of both contraction and expansion. The invested capital generally trended upward, aligning with the company's capital growth strategy, though minor reductions in the last year suggest adjustments. The peaks in economic profit and spread in 2024 imply improved operational performance and capital utilization compared to prior years. However, intermittent declines in economic profit and spread indicate the presence of external or internal challenges impacting financial outcomes in certain years.

Net Sales Trend

The net sales demonstrate a consistent upward trajectory over the analyzed periods. Starting from US$149,351 million in 2019, net sales increased every year to reach US$249,625 million by 2024. This steady growth indicates expanding revenue generation capabilities and potentially increasing market demand or successful business expansion.

Economic Profit Analysis

Economic profit shows notable fluctuations throughout the periods. Initially, it declined from US$1,079 million in 2019 to US$757 million in 2020, possibly reflecting heightened costs or adverse market conditions. Subsequently, the economic profit rose substantially to US$1,823 million in 2021 and further increased to US$2,538 million in 2022, demonstrating improved operational performance and value creation. A significant dip occurred in 2023 to US$1,380 million, but it rebounded sharply to the highest level of US$2,901 million in 2024, suggesting recovery and enhanced profitability.

Economic Profit Margin Insights

The economic profit margin, expressed as a percentage, mirrors the variability seen in absolute economic profit figures. It decreased from 0.72% in 2019 to 0.46% in 2020, indicating reduced efficiency or profitability relative to sales. The margin then increased to 0.95% in 2021 and 1.14% in 2022, aligning with improved economic profit values. The margin dropped again to 0.58% in 2023, before rising substantially to 1.16% in 2024, the highest margin in the period analyzed. These fluctuations highlight periods of both operational challenges and strong profitability improvements.

Overall Interpretation

The data reveals a pattern of robust sales growth combined with variable economic profit performance. While sales consistently increased, indicating successful revenue expansion, economic profit and its margin were more volatile, reflecting changing cost structures, investment returns, or external factors affecting profitability. The pronounced recovery in economic profit and margin in the final year suggests strengthened financial health and efficient capital utilization.