Costco's High Returns and Reinvestment Fuel Earnings Growth, But Slower Growth Seen Ahead
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Costco's return on equity (ROE) of 25% indicates it is efficiently using capital to generate profits. Higher ROE typically leads to higher earnings growth.
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Costco's net income grew 15% over the past 5 years, higher than the industry average of 12%, likely due to its high ROE.
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Costco reinvests most of its profits to drive earnings growth rather than paying dividends. Its 74% retention ratio is healthy.
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Costco has paid dividends for 10+ years showing commitment to shareholders. Its future payout ratio is expected to be 25%.
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Costco's high ROE and earnings growth are positives, but earnings growth is expected to slow down per analyst forecasts.