Costco's Winning Strategy of Value and Loyalty Drives Steady Growth, But High Valuation Raises Some Concerns

Costco's business model is simple yet powerful - membership fees provide high margins, customer loyalty, and advance cash flow. Steady growth in members and renewal rates.

Costco aims to provide the best value to customers by passing supplier benefits directly to them. This results in rock-steady gross margins around 11%.

With a proven model of steady same-store sales growth and rapid ROI on new warehouses, Costco has significant room to continue expanding its geographic footprint.

Valuation is high at ~40x P/E but quality companies warrant quality multiples. EPS growing at 15%+ supports current valuation.

Risks include over-reliance on current lofty valuation multiple, erosion of competitive advantage if margins rise, and e-commerce disruption. But business looks solid.