If you had invested $10,000 in Costco stock 15 years ago, you would have that much today
Costco Wholesale (NASDAQ: COST) has long been one of the most successful retailers in the United States and much of the world. However, this did not make the company invulnerable during the financial crisis 15 years ago.
At the time, the company’s rapid growth briefly turned negative as consumers cut back on unnecessary spending. Nevertheless, the company quickly recovered as the crisis subsided. Moreover, the improvements led to massive gains for the retailer’s stock as the expansion continued.
Costco’s profits over 15 years
In August 2009, an investment of $10,000 would have bought 206 shares at a price of about $48.50 per share. Today, at a price of just over $881 per share, that investment would be worth just over $180,000. And when you factor in the total return, which includes dividends, an investor would have more than $250,000.
As mentioned above, despite its recession-resistant business, Costco was not immune to the effects of the financial crisis. In fiscal year 2009 (ended August 30, 2009), the company’s net sales of $70 billion fell by almost 2% from the previous year’s level. This is quite a change considering that net sales had increased by 13% in 2008.
However, disciplined investors recognized their opportunity when Costco’s P/E ratio fell to just 19 times earnings as a result of the crisis, well below today’s earnings multiple of 54.
Moreover, the 2009 revenue decline became an anomaly as net sales grew 9% in fiscal 2010 and 14% in fiscal 2011. Such growth rates triggered a steady rise in the stock price that continues to this day.
Lessons for today
Granted, Costco’s success is probably more than priced into the stock today. At the aforementioned 54 times earnings, investors may be hesitant to pay such a price when net sales grew only 7% in the first three quarters of fiscal 2024 (which ended May 12).
Still, Costco’s situation in 2009 is a reminder of how tough economic times can present buying opportunities for quality companies. Knowing this, you should learn to put negative feelings aside and start accumulating quality stocks during such times.
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Will Healy does not own any stocks mentioned. The Motley Fool owns and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
If you invested $10,000 in Costco stock 15 years ago, this is how much you’d have today. Original article from The Motley Fool
