As consumers rush out to buy rolls and rolls of toilet paper, one stock that may be the benefactor of such madness is Costco Wholesale Corporation (NASDAQ:COST).
There’s no shortage of YouTube videos out there and pictures showing why the retailer may smash earnings expectations when it goes to report its next quarterly results: consumer spending looks to be through the roof.
Even without the coronavirus sending consumers into a spending frenzy the stock would still be a good buy because it’s a strong, profitable retailer. That’s rare in a time when many retailers are shutting down their businesses.
Costco remains a strong buy and it’s evident it’s still a go-to place for many consumers. And the longer that the panic buying continues, the longer that Costco will benefit from the frenzy. Shares of Costco haven’t fallen as significantly as some other stocks have in recent weeks, likely because of the activity its stores have been seeing.
The one negative about Costco’s stock, however, is that it trades at close to 40 times earnings. That’s a hefty price for a stock that in fiscal 2019 saw sales growth of just 7.9%. Although it’s a solid growth rate,
it’s not worth paying 30+ times earnings for.
However, if the panic surrounding the coronavirus calms down in a few months when Costco goes to report earnings, the stock could be in a position to soar if sales are as good as what the lineups at its stores seem to suggest.
In addition to capital appreciation, investors can also benefit from the stock also paying investors a modest dividend of around 1% per year.
