Discount membership warehouse operator Costco (Nasdaq:COST) closed out its fiscal year on a high note and reported double-digit growth, for the full year. This is likely ahead of what the company will be able to report over the long haul which, combined with a rather lofty earnings valuation, suggests other rivals are more appealing investment candidates. (For more on growth, read Steady Growth Stocks Win The Race.)

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Full Year Recap
Sales advanced a very healthy 14% and reached $87 billion. This exceeded average annual growth trends of just over 9%, over the past decade, and is due to a number of factors. For starters, management stated that gasoline price inflation and positive currency fluctuations have boosted top-line trends. Total same-store sales for the year advanced 7%, but this would have been a more modest 5%, when stripping out these two items. International is also driving total growth trends, with comps up 16%, or 10% when stripping out the above two items. Also, Costco is now consolidating sales from its joint venture in Mexico. Backing out this change, sales growth was approximately 12%. Finally, the company is still experiencing an increase in consumer traffic, following the severe recession a couple of years ago.

Operating income growth was even stronger, rising 17.4% to $2.44 billion, as management was able to hold merchandise costs and operating SG&A cost below sales growth. However, now that Mexico is being consolidated, the company backs out income, related to the portion of the joint venture it doesn't own. This reduced net income growth to 12.2%, as earnings reached under $1.5 billion. Share buybacks boosted earnings per diluted share to $3.30 for year-over-year growth of 13%.

Costco doesn't provide sales or earnings guidance, but did say it expects to open 20 new stores in the coming year. This represents square footage growth of 3.5% and roughly 3.4% growth on its existing store base of 592 locations. Analysts currently project full-year sales growth of more than 7%, total sales of $95.5 billion and earnings of $3.85 per share.

Management decided to raise membership fees by roughly 10%, which will boost sales modestly and help company profits, quite a bit. The increase is unlikely to be met by a customer backlash, as it has been at least five years since they experienced a fee increase. The forward P/E is currently slightly below 20, which is too rich, given that annual average sales and earnings growth has averaged only in the high single digits over the past decade, and is likely to do so going forward.

More affordable big-box rivals include Wal-Mart (NYSE:WMT), which also runs membership store archrival Sam's Club, Best Buy (NYSE:BBY) and Staples (Nasdaq:SPLS). Bed Bath & Beyond (Nasdaq:BBBY) also trades at a forward earnings multiple of about 13, and should grow profits in the double-digits for the foreseeable future.

Bottom Line
Costco is an impressively run company with a fiercely loyal customer base. Unfortunately, Costco's valuation remains too rich to consider it an appealing investment. The savy investor should be considering its rivals for a better outcome. (To gain a better understand of what P/E has on stock price, check out How To Use The P/E Ratio And PEG To Tell A Stock's Future.)

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