There's no denying that investors love companies that can remarkably grow their wealth. That's precisely what one dominant business has done historically.

In the past 40 years, its shares have generated a spectacular total return of 22,000%. That means a $10,000 investment made in April 1985 would be worth an eye-popping $2.2 billion today. No one will argue with this outcome, which translates to a superb 14.4% annualized gain.

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Continue reading to learn more about this monster stock and what makes the business special.

Doing the same thing

If there's a stock with that kind of phenomenal track record, investors need to pay attention. The company in question is Costco (NASDAQ: COST), the giant warehouse club operator with 897 locations around the globe. The operations haven't changed much in the past four decades, as there's always been an emphasis on providing shoppers with quality merchandise at affordable prices.

Costco has experienced meaningful growth, though. Its store base totaled just 221 in 1994. Besides the U.S., it has a presence today in 13 other countries. Executives see potential internationally, with long-term plans for just under half of annual new store openings to come outside the United States.

What's particularly impressive is that Costco experiences durable demand, regardless of economic conditions. We're seeing this play out today, with same-store sales increasing 6.8% in Q2. This key metric has risen in at least the last 13 full fiscal years. Costco is clearly a consumer favorite.

That has propelled net income gains. Diluted earnings per share have climbed at a compound annual rate of 11.6% in the past 20 years. According to Wall Street consensus analyst estimates, this closely watched bottom-line figure is expected to grow at a yearly pace of 11.1% between fiscal 2024 and fiscal 2027.

Dealing with competition

The retail sector is arguably the most competitive industry in the world. From a consumer's perspective, there are virtually an unlimited number of choices for where to spend money. In theory, this should make things difficult for Costco.

But over its storied history, the business has developed durable competitive strengths that support its success. Scale is particularly helpful when it comes to supporting Costco's industry position.

During the 12-week period that ended Feb. 16 (Q2 2025), the business generated $62.5 billion in net sales. That makes it the third-biggest retailer in the world. That volume means Costco has tremendous buying leverage over its suppliers. This advantage is bolstered by the fact that the company's typical warehouse carries just 4,000 stock-keeping units, 87% less than the average supermarket.

Buying massive quantities of a smaller number of goods allows Costco to obtain cost savings. And these are constantly passed to shoppers in the form of everyday low prices on store shelves.

Because of its intense focus on always doing what's right for the customer, Costco has developed a strong brand presence. That supports growth, with membership households increasing 6.8% in the latest fiscal quarter. Loyalty is impressive, as the worldwide renewal rate was 90.5%.

Time to buy Costco?

After learning more about Costco, the immediate reaction from investors might be to buy the stock. After all, shares are currently on the dip, down 9% from their February peak. It's hard to argue with the long-term track record of compounding shareholder capital.

The market is fully aware of just how great of a business Costco is. This is clearly represented by the valuation. If you want to buy the stock, you must be comfortable paying a price-to-earnings ratio of 57. That's not far off from their steepest level ever.

I think shares are extremely expensive. And in this instance, the starting valuation can get in the way of achieving adequate returns going forward. Investors probably shouldn't buy the stock right now.

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Neil Patel 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.