Costco Wholesale (COST), perhaps benefiting from consumers hoping to save money as gas prices rise and the specter of inflation looms on the horizon, saw its profits rise 4.7% in the fourth quarter.
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Costco’s increased membership as well as a $5 per member fee hike also contributed to the gain. September same store sales rose 9% for the company.
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Contributing to the bullish drumbeat is Jim Cramer. The bombastic analyst believes the stock is undervalued and may see greater than 30% stock price growth in the next year. Cramer believes the stock may even be buoyed by a recession or inflation because it offers a value to consumers largely unmatched by its competitors. If consumers grow more price sensitive, it is likely the company’s membership ranks will swell even further.
Looking at Costco’s Numbers:
Return on Equity: 12.03%
52-Week Change: 38.07%
Trailing P/E: 30.07
Forward P/E (fy 9/08): 23.76
Comparison Price to Earnings and Earnings per share:
CostCo (COST) P/E: 30.1
Target (TGT) P/E: 19.2
Wal-Mart (WMT) P/E: 15.3
Industry Average P/E: 20.8
CostCo (COST) EPS: 2.3
Target (TGT) EPS: 3.4
Wal-Mart (WMT) EPS: 3.0
Industry Average EPS: 1.2
Doing Well While Their Competitors Sag:
Target recently surprised investors when they missed their earnings estimates while not impressing investors with their sales forecast. Wal-Mart also surprised investors with poor earnings despite record sales.
Analysts remain optimistic about the company’s outlook over the holiday season. Also, the company’s Chief Financial Officer, despite some worrying over the economy, is upbeat about the company’s success. “You don’t know what’s going to happen with the economy. We are starting off well. We are pretty optimistic about the year so far.”
Next, we will look at some potential covered call trades on the Issaquah, Wash.-based retailer and its competitors.
These trades were all located using the powerful search tools found at www.poweropt.com.
|Covered Call Search|
|TGT||65.77 (+0.02)||TGTAN||08 JAN 70.0 (101)||3.1||62.67||4.7||4.9||11.7|
|TGT||65.77 (+0.02)||TGTAM||08 JAN 65.0 (101)||5.4||60.37||8.2||7.7||7.7|
|COST||69.13 (+5.82)||PRQAN||08 JAN 70.0 (101)||3.8||65.33||5.5||5.8||7.1|
|TGT||65.77 (+0.02)||TGTKU||07 NOV 67.5 (38)||2.2||63.57||3.3||3.5||6.2|
|TGT||65.77 (+0.02)||TGTAL||08 JAN 60.0 (101)||8.5||57.27||12.9||4.8||4.8|
|WMT||45.59 (+0.38)||WMTAI||08 JAN 45.0 (101)||2.6||42.99||5.7||4.7||4.7|
|COST||69.13 (+5.82)||PRQAM||08 JAN 65.0 (101)||6.8||62.33||9.8||4.3||4.3|
|TGT||65.77 (+0.02)||TGTKM||07 NOV 65.0 (38)||3.4||62.37||5.2||4.2||4.2|
|TGT||65.77 (+0.02)||TGTAY||08 JAN 57.5 (101)||10.4||55.37||15.8||3.8||3.8|
|WMT||45.59 (+0.38)||WMTLI||07 DEC 45.0 (73)||2.25||43.34||4.9||3.8||3.8|
|TGT||65.77 (+0.02)||TGTAK||08 JAN 55.0 (101)||12.4||53.37||18.9||3.1||3.1|
Competitors for TGT include: Costco Wholesale Corp. (COST), Wal-Mart Stores Inc. (WMT), Kmart Corporation (private), Bed Bath & Beyond Inc. (BBBY), Big Lots Inc. (BIG), Charming Shoppes Inc. (CHRS), Gymboree Corp. (GYMB), Kohls Corp. (KSS), PetsMart Inc. (PETM), Sears Holdings Corp. (SHLD), TJX Companies Inc. (TJX), and Tuesday Morning Corp. (TUES).
Competitors for COST include: Target Corp. (TGT), Wal-Mart Stores Inc. (WMT), SAM’S CLUB (private), and BJs Wholesale Club Inc. (BJ).
Competitors for WMT include: Costco Wholesale Corp. (COST), Target Corp. (TGT), Carrefour SA (private), Autozone Inc. (AZO), Bed Bath & Beyond Inc. (BBBY), Best Buy Co. Inc. (BBY), Big Lots Inc. (BIG), Brown Shoe Co. Inc. (BWS), CSK Auto Corp. (CAO), Circuit City Stores Inc. (CC), Casual Male Retail Group Inc. (CMRG), Conns Inc. (CONN), CVS Corp. (CVS), Dicks Sporting Goods Inc. (DKS), drugstore.com Inc. (DSCM), Family Dollar Stores Inc. (FDO), Foot Locker Inc. (FL), Freds Inc. (FRED), Hibbett Sporting Goods Inc. (HIBB), Kroger Co. (KR), Nash Finch Co. (NAFC), 99 Cents Only Stores (NDN), PetsMart Inc. (PETM), Payless ShoeSource Inc. (PSS), Rite Aid Corp. (RAD), Renters Choice Inc. (RCII), Sally Beauty Holdings Inc. (SBH), Sears Holdings Corp. (SHLD), Spartan Stores Inc. (SPTN), Stage Stores Inc. (SSI), Supervalu Inc. (SVU), Safeway Inc. (SWY), Walgreen Co. (WAG), Winn-Dixie Stores Inc. (WINN), and Zale Corp. (ZLC).
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[tags] Jim Cramer, Kmart Corporation, SAM’S CLUB, Carrefour SA, AZO, Autozone Inc., BBBY, Bed Bath & Beyond Inc., BBY, Best Buy Co. Inc., BIG, Big Lots Inc., BJ, BJs Wholesale Club Inc., BWS, Brown Shoe Co. Inc., CAO, CSK Auto Corp., CC, Circuit City Stores Inc., CHRS, Charming Shoppes Inc., CMRG, Casual Male Retail Group Inc., CONN, Conns Inc., COST, Costco Companies Inc., CVS, CVS Corp., DKS, Dicks Sporting Goods Inc., FDO, Family Dollar Stores Inc., FL, Foot Locker Inc., FRED, Freds Inc., GYMB, Gymboree Corp., HIBB, Hibbett Sporting Goods Inc., KR, Kroger Co., KSS, Kohls Corp., NAFC, Nash Finch Co., NDN, 99 Cents Only Stores, PETM, PetsMart Inc., PSS, Payless ShoeSource Inc., RAD, Rite Aid Corp., RCII, Renters Choice Inc., SBH, Sally Beauty Holdings Inc., SHLD, Sears Holdings Corp., SPTN, Spartan Stores Inc., SSI, Stage Stores Inc., SVU, Supervalu Inc., SWY, Safeway Inc., TGT, Target Corp., TJX, TJX Companies Inc., TUES, Tuesday Morning Corp., WAG, Walgreen Co., WINN, Winn-Dixie Stores Inc., WMT, Wal-Mart Stores Inc., ZLC, Zale Corp., covered call investment strategy, investment strategy, poweroptions [/tags]