Is Costco Stock a Buy for Long-Term Investors Amid Near-Term Volatility and Strong E-Commerce Momentum?

For long-term investors, the question of whether Costco Wholesale Corporation (COST) represents a compelling value proposition hinges on two critical factors: the sustainability of its earnings and its ability to adapt to evolving retail dynamics, particularly in e-commerce. As of late 2025, Costco's financial metrics and strategic initiatives present a nuanced picture, balancing robust fundamentals with challenges posed by a high valuation and competitive pressures.

Financial Fundamentals: Stability and Growth

Costco's financial health remains a cornerstone of its appeal. The company's price-to-earnings (P/E) ratio stands at approximately 48.57–48.71, a premium compared to the industry average, but justified by its consistent earnings growth. Fiscal 2025 basic earnings per share (EPS) reached $18.24, up from $16.56 in fiscal 2024, reflecting a 10% annual increase. This growth is underpinned by a low debt-to-equity ratio of 0.28, signaling strong financial discipline and resilience against economic headwinds. For value investors, Costco's ability to maintain profitability while managing leverage is a positive signal, even as its elevated P/E ratio raises questions about near-term affordability.

E-Commerce Momentum: A Strategic Catalyst

Costco's e-commerce segment has emerged as a key driver of growth, outpacing its overall sales expansion. In fiscal Q3 2025, e-commerce sales surged 14.8% year-over-year, compared to total sales growth of 8%. This acceleration is fueled by targeted initiatives such as Buy Now, Pay Later (BNPL) options, personalized promotions, and logistics enhancements, including a 31% increase in bulky-item deliveries. While e-commerce accounts for only 8% of Costco's total sales-a fraction of Amazon's 37.6% U.S. market share in 2024 according to market data-its growth trajectory suggests a deliberate, membership-centric approach to digital expansion.

Comparisons to industry peers highlight both strengths and gaps. Walmart, for instance, reported 22% year-over-year e-commerce growth in Q1 2026, driven by its omnichannel strategy and marketplace expansion. However, Costco's e-commerce profitability appears stronger, with high-margin digital sales complementing its core warehouse model. This integration of online and offline operations may offer a more sustainable path to long-term earnings growth than pure-play e-commerce rivals, which often face margin compression.

Earnings Sustainability: Balancing Growth and Valuation

The sustainability of Costco's earnings depends on its ability to translate e-commerce momentum into lasting profitability. While its forward P/E ratio of 50.11 exceeds Walmart's 40x valuation, Costco's membership model provides a recurring revenue stream that buffers against retail volatility. For example, Q4 2024 net income rose 10.9% year-over-year, demonstrating resilience even as inflationary pressures persist.
However, investors must weigh these strengths against risks. Costco's e-commerce segment, though growing, remains a small portion of its business, leaving it vulnerable to competition from Amazon and Walmart, which have deeper digital ecosystems. Additionally, the company's high P/E ratio implies that investors are paying a premium for future growth expectations. If e-commerce adoption slows or margins erode, this valuation could become a liability.

Conclusion: A Buy for the Long-Term?

For value investors prioritizing earnings sustainability, Costco presents a mixed case. Its low debt, strong membership economics, and accelerating e-commerce growth support a long-term buy thesis, particularly for those willing to tolerate near-term volatility. However, the company's elevated P/E ratio and the dominance of Amazon and Walmart in digital retail necessitate caution. Costco's success will depend on its ability to scale e-commerce without diluting its core value proposition-a challenge it appears well-positioned to address through strategic innovation.

In the end, Costco's stock may appeal to patient investors who recognize that its current valuation reflects not just past performance, but the potential to redefine its role in the evolving retail landscape.