Costco Wholesale (COST -0.37%) is one of the most iconic and recognizable retailers in the world. Its massive warehouses are often packed with customers, and its treasure hunt experience inevitably leaves shoppers spending much more than they planned. That’s evident with the company’s strong and impressive growth over the years.

And with so much room to expand, especially in international markets, it’s hard to not like Costco as a long-term investment. But does it have enough upside to potentially turn a $25,000 investment into $1 million over the next 25 years?

Costco’s growth has been robust

What’s impressive about Costco’s business is that it always seems to do well. It generated fantastic numbers during the pandemic and even amid inflation. Whether consumers have been loading up on essentials, discretionary purchases, or trying to save money, there always seems to be plenty of traffic at its stores. The company has been able to consistently grow its top line over the past decade at a fairly high rate — close to double digits.

COST Operating Revenue (Quarterly YoY Growth) data by YCharts

The bulk of its warehouses, however, are still in North America; the United States, Canada, and Mexico account for 767 of its 897 warehouses. The company has been growing its presence in China, but with just seven warehouses there, it’s barely scratching the surface. And it’s the massive long-run opportunities in international markets that can make this a top growth stock to own for not only years, but decades.

Over the past 10 years, the stock has risen an impressive 520%. The one potential problem, however, is that its high valuation could make it difficult for it to replicate those types of returns in the years ahead.

The stock trades at a massive premium

Costco is a beloved business and stock, but to own a piece of it, you have to be prepared to pay a big premium. Today, it’s trading at more than 50 times trailing earnings. That’s expensive, given its single-digit growth rate. The danger when paying such a high multiple for the business is that sky-high expectations are priced in, and if the company doesn’t deliver, there could be a sharp drop in its share price.

COST PE Ratio data by YCharts

Investors have been paying an elevated multiple for the stock since the pandemic began and when its growth rate took off. But now as that growth rate is coming down and staying around more normal levels, I would expect to see the price-to-earnings multiple to also come down, which is why I wouldn’t be terribly optimistic that this can be a millionaire-making stock to hold, even over the long term.

Costco is a good buy, but investors should temper their expectations

While Costco has delivered some great gains for investors in recent years, for it to turn a $25,000 investment into $1 million, it would need to be a 40-bagger; its market cap would need to eventually reach $16.6 trillion. A lot can happen over 25 years, but I wouldn’t expect Costco to turn out to be 40 times more valuable than it is today, as it looks to be overdue for a sizable correction.

This is still a good stock to buy and hold, but investors should be careful not to assume that the stock’s impressive gains in recent years will continue for decades.

Bulk-buying, bargain-hunting shoppers propelled Costco Wholesale (COST 0.43%) to a record-breaking 2024 for sales and earnings. The discount retailer is benefiting from a resilient economic backdrop while capitalizing on an ongoing e-commerce expansion. Its latest update highlighted further growth momentum to kick off 2025.

With the stock up 47% over the past year and currently trading at an all-time high, can the rally keep going? Let’s discuss what to do with shares of Costco Wholesale.

The case to buy or hold Costco stock

With 139 million cardholders worldwide, Costco’s members-only store concept remains massively popular. Its loyal customer base is attracted to low prices on a variety of items, from everyday essentials to jewelry, electronics, and furniture. Access to exclusive deals, including discounted gasoline, travel services, and an in-store pharmacy, means that for many people, the annual membership fee is a no-brainer.

Costco’s ability to pull in new members and keep them within its retail ecosystem highlights the power of its operating model and the attraction of the stock as a possible investment.

Image source: Getty Images.

The recent trends have been impressive. Costco recently reported its January results (for the period ended Feb. 2), with net sales up 9.2% year over year and total company comparable store sales increasing by 9.8% during the month, excluding the impact of changes in gasoline prices and foreign exchange.

Perhaps the bigger story has been Costco’s success at building out its e-commerce business, with segment comparable sales 13.6% higher than the same month last year. This dynamic is important as it represents a new growth driver, allowing Costco to leverage its extensive logistics infrastructure with a more diversified merchandise mix to reach a wider consumer market online.

According to Wall Street estimates, Costco is on track to generate a solid 7% revenue increase this year and in 2026. The runway includes the hike to the U.S. and Canada membership pricing announced last year, lifting the top line and profitability margins as the plans renew at a modestly higher rate. Costco intends to open 20 new warehouses in the remainder of fiscal 2025 as a tailwind for new memberships. The forecast for earnings per share (EPS) is even stronger, climbing at around a 10% annual rate for the next two years.

Investors convinced that Costco is well-positioned to continue its path of steady, profitable growth as it expands internationally have plenty of reasons to buy the stock.

Data source: Yahoo Finance. YOY = year over year.

The case to sell Costco stock

There’s a lot to like about Costco, with all indications that its outlook is as strong as ever, supported by solid fundamentals. On the other hand, the apparent optimism toward the company’s retail dominance has translated directly into an objectively expensive valuation. Shares of Costco are trading at 58 times its consensus 2025 EPS estimate, a level well above peers like Walmart and Amazon, each with a forward P/E ratio closer to 37.

The market appears to be assigning Costco an earnings premium based precisely on its membership-based model and consistent execution history. While this metric alone doesn’t mean the stock needs to sell off anytime soon, the concern is that it could at least limit the upside in the share price against already high expectations. All this is in an environment that faces other uncertainties with Costco being exposed to broader macroeconomic conditions. While details have not been confirmed, proposed trade tariffs by the Trump administration have the potential to generate some supply chain disruptions or inflationary cost pressures as an operating headwind.

Investors who believe Costco will be challenged to achieve its financial targets and see room for membership performance metrics to slow going forward could consider selling or at least avoiding the stock.

COST PE Ratio (Forward) data by YCharts

Decision time

I believe shares of Costco are just too pricey to buy today with conviction. There are likely enough strong points for shareholders to continue holding, but investors sitting on the sidelines may find more compelling opportunities elsewhere in the stock market. Nevertheless, this is one stock to keep on your radar for the possibility of a market correction that might offer a chance to acquire shares at a lower and more attractive price.