In the summer of 2012, Costco traded at $78 per share. It was earning $4 per share in profits and was trading at a valuation of 19.5x earnings. The stock had climbed ten-fold over the previous twenty years, and had increased almost 100-fold since its 1982 initial public offering. Its sales per store were astounding, as it was one of the only brick-and-mortar retailers that had reported same-store sales growth of at least 5% annualized. It was generating almost $700 million in cash from its members who have to pay an annual subscription fee (that is now $60) in order to join. The dividend, having been initiated in 2002, had risen in every year of its existence and only consumed 27% of the annual profits. And it was sitting on nearly $10 billion in cash. It seemed to meet all the criteria of a wonderful business trading at a fair … Read the rest of this article!
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