Is Costco Stock a Pathway to Long-Term Wealth? A Deep Dive into Historical Performance, Membership-Driven Profitability, and Valuation

Costco Wholesale Corporation (COST) has long been a darling of the retail sector, celebrated for its membership-driven business model and consistent growth. But as of 2025, with the stock having surged to an average price of $957.62-only to fall 6.75% year-over-year-investors must ask: Is Costco still a "millionaire-maker" in today's market? This analysis evaluates Costco's historical performance, the durability of its membership revenue, and its current valuation to determine its role in a long-term portfolio.

Historical Performance: A Volatile Yet Rewarding Ride

Costco's stock has delivered extraordinary returns over the past 15 years. From 2010 to 2025, the compound annual growth rate (CAGR) was 22.44%, with standout years like 2023 (49% return) and 2024 (39.62% increase) propelling the stock to record highs according to financial data. Even during the 2022 downturn (-19.05%), the company rebounded strongly in 2023 and 2024, showcasing resilience amid macroeconomic headwinds.

This growth has been underpinned by Costco's ability to scale its business. Annual revenue in 2025 reached $275.235 billion, an 8.17% increase from 2024. The rising price-to-sales ratio further reflects investor confidence in the company's ability to convert revenue into value. However, the recent 6.75% decline in 2025 highlights the risks of market overvaluation and shifting investor sentiment.

Membership-Driven Profitability: A Recurring Revenue Engine

Costco's membership model is a cornerstone of its success. In fiscal 2025, membership fees totaled $5.323 billion, with Q4 2025 alone generating $1.724 billion-a 14% year-over-year increase. Executive memberships, which account for 74.2% of global sales, have become a key growth driver. This tiered structure allows Costco to extract higher value from its most loyal customers while maintaining a low-cost, high-volume retail strategy.

The durability of this model is evident in Q3 2025 results, where a 93% global membership renewal rate and 39.7 million paid Executive memberships underscored the stickiness of Costco's customer base. Despite challenges like declining online renewal rates, the company is investing in digital communication and auto-renewal tools to mitigate churn according to Q3 2025 earnings. For investors, this recurring revenue stream provides a stable foundation, even as broader retail trends fluctuate.

Valuation Concerns: A High P/E and PEG Ratio Signal Caution

While Costco's fundamentals are robust, its valuation metrics raise questions about future returns. As of December 2025, the forward price-to-earnings (P/E) ratio stands at 44.10, significantly above the industry average. The PEG ratio, at 4.76, is even more concerning-253% higher than the Consumer Defensive sector average of 1.35 according to financial analysis. This suggests the stock is trading at a premium relative to its earnings growth prospects, which are currently estimated at 9.6% according to Zacks fundamental data.

Historically, Costco's PEG ratio has averaged 4.45 over the past decade, with the current reading slightly above that benchmark according to historical data. While the company's long-term growth trajectory remains intact, the elevated valuation implies investors are paying a premium for future earnings. A Zacks Rank of #3 (Hold) further reinforces the idea that Costco is neither undervalued nor a high-growth play.

Is Costco Still a "Millionaire-Maker"?

The term "millionaire-maker" typically refers to stocks that generate outsized returns over time. Costco's historical performance-from a 22.44% CAGR since 2010 to a 19.79% CAGR over the past five years-certainly qualifies it as such. However, the current valuation complicates this narrative. A P/E of 44.10 and a PEG of 4.76 suggest the stock is priced for perfection, leaving little margin for error if earnings growth slows or macroeconomic conditions deteriorate.

For long-term investors, Costco's membership model and recurring revenue provide a strong tailwind. The company's ability to grow membership fees (up 14% in Q4 2025) and expand its Executive tier demonstrates adaptability in a competitive retail landscape. Yet, the recent 6.75% decline in 2025 underscores the risks of overvaluation.

Conclusion: A Strategic Holding in a Diversified Portfolio

Costco remains a compelling long-term investment, but its role in a diversified portfolio should be carefully considered. The company's membership-driven profitability and consistent revenue growth are strengths, but the current valuation suggests limited upside relative to its historical performance. Investors seeking aggressive growth may find better opportunities elsewhere, while those prioritizing stability and recurring cash flows can still benefit from Costco's durable business model.

In today's market, Costco is less of a "millionaire-maker" and more of a "wealth preserver." Its stock should be viewed as a strategic holding rather than a speculative bet, with allocations balanced against lower-valuation growth stocks and defensive assets. As always, diversification and disciplined valuation analysis remain key to long-term success.