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Where Will Costco Stock Be in 3 Years?
Key Points
Costco stock has regularly outperformed the S&P 500 over three-year stretches.
The company’s membership model and low prices help it thrive in all kinds of markets.
The Kirkland store brand is another major driver of both value and loyalty.
Warehouse retailer Costco Wholesale (NASDAQ: COST) has been a fairly cyclical stock in the past. The stock chart often stays close to the S&P 500 (SNPINDEX: ^GSPC) index for a few years, followed by a couple of years with market-crushing returns. Taken together, this pattern has resulted in wealth-building shareholder returns over the long haul.
Where is Costco positioned in this cycle right now, and where should the stock go in the next three years? Let's take a look.
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Costco keeps running circles around the S&P 500
First, let me state the obvious. Nobody knows exactly what the next three years will look like. There could be another pandemic around the next corner, or perhaps a new technology that makes the artificial intelligence and quantum computing booms look small. Historians can only look backward, and unpredictable events can unravel any forward-looking prediction I make -- bullish or bearish.
That being said, Costco has a long history of outperforming the market in a wide variety of economic situations. I compared the stock's total return to the S&P 500 (SNPINDEX: ^GSPC) index over a handful of three-year periods.
COST Total Return Level data by YCharts
Starting with a 109% 3-year Costco return against a 67% gain in the market index as of July 7, 2025, all of my sample comparisons made Costco look good.
That includes the inflation-burdened span from the end of 2022 to Dec 31, 2024. The COVID-19 crisis, starting from January 2020, showed a 63% Costco gain in three years while the S&P 500 rose 25%.
There was a close call from 2015 to 2018, with Costco lagging behind the market for most of that period -- but the warehouse retailer still came back to a 35% vs. 20% victory in a period characterized by the Brexit and a slower pace of Chinese economic growth.
I kept going with a few more samples, but the results were incredibly consistent. I'm sure there are counterexamples out there, especially if you look at spans based on mid-year dates instead of full calendar years, but the pattern is clear. Costco rarely underperforms the S&P 500 in any given three-year period.
Image source: Getty Images.
How Costco's secret sauce keeps working
Past performance should never be seen as a guarantee of upcoming results. Always in motion, the future is. Even so, Costco keeps proving that the company can deliver strong results in different markets.
There are many reasons for Costco's resilience. For example:
- Low prices make Costco a popular shopping destination when budgets are tight.
- The membership model lets Costco sell goods with very low gross profit margins, leaving the heavy bottom-line lifting to those annual fees. That revenue stream is pretty much pure profit, with very predictable annual and quarterly volumes.
- The Kirkland store brand is more than just another cost-cutting supply chain adjustment. Costco puts in a lot of work to ensure that the Kirkland products are competitive with the best name-brand alternatives, and you won't see this brand in sections where the research and development team can't check all the right boxes. For example, co-founder Jim Sinegal turned down the idea of selling Costco-branded gas 8 times over several years. Now, the gas pumps account for a substantial portion of Costco's total sales.
That's just a handful of stabilizing qualities. Overall, Costco is an incredibly well-run business that can roll with lots of different punches. And that's why the stock keeps outperforming even the high-quality names of the S&P 500.
Why betting against Costco is usually a bad idea
Based on Costco's history of stellar and predictable returns, I'm confident that the stock should keep up with the market over the next three years as well. The business model is both flexible and robust -- a rare combination that spells success under most circumstances.
On the downside, Costco's top-notch business is no secret. You've seen the stock chart already, and shares are changing hands at the lofty valuation of 56 times earnings. I keep kicking myself for not picking up a few Costco shares years ago, when they were more affordable. Again, the stock price more than doubled since July 2022.
Chances are, there'll be more kicking to do in 2028 if I don't grab some Costco stock this summer. Truly great companies can be worth a premium price tag, and Costco belongs in this category.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
