Prediction: Costco Will Beat the S&P 500 Again

Costco Wholesale (COST -0.08%) has spent decades outpacing the market. Even after its big run in 2023 and 2024, I think it is still on track to beat the S&P 500 over the next year and remains a solid buy for patient investors. The ticker has outperformed the S&P 500 in 16 out of the 25 years between 2000 and 2025, giving it a historical win rate of 64% over that 25-year span. Image source: Getty Images. Over longer stretches, the record speaks for itself. Over the past five years, Costco has delivered a total return of about 124% versus roughly 75% for the S&P 500. Over three years, it has beaten the index again with a 76% gain, versus about 75% for the benchmark. The stock has climbed more than 28,000% in real terms since the mid-1980s. That kind of compounding is hard to find in consumer goods. Even after a modest pullback from its May all-time high near $1,094, Costco still sits near $950 and has held most of its recent gains while the broader market has seen more volatility. Today's Change(-0.08%) $-0.75Current Price$961.10 Costco is an investor's dream There is a reason for all this success. Costco's engine is not a fad. It is a membership model that generates a steady stream of high-margin fee income alongside fast-moving sales. Renewal rates in the United States and Canada are above 92%, and global renewal is near 90%, meaning almost nine out of 10 members pay to come back year after year. That is a very sticky base. On top of that, the company continues to deliver strong operating results. July 2026 net sales reached $23.12 billion, up 10.7% from a year earlier, with total company comparable sales up 8.9% and digitally enabled comparable sales up 17.7%. What makes Costco interesting from here is that it still has room to grow without changing the formula. It continues to open new warehouses in underpenetrated markets, expand its e-commerce and delivery offerings, and add services such as travel, optical, and pharmacy to deepen member engagement. The balance sheet is clean, with modest debt relative to cash flow. Management has also shown that it will share excess capital through occasional special dividends and steady regular dividend growth. Costco's future is on track to keep beating the S&P 500 The stock is not cheap. At around $950 per share, Costco trades at more than 30 times forward earnings, a premium to many retailers and the market itself. The reason investors still pay that price is that the earnings stream has proven durable across cycles. During years when the S&P 500 struggled, Costco often kept delivering mid-single-digit comp sales and solid profit growth. When the index surged in 2023 and 2024, Costco managed to beat it yet again. A couple of things to note: Even though Costco is a strong, reliable business, its heavy reliance on membership fees means slower membership growth or lower renewal rates could hurt profits. Its international expansion, especially in markets like China, offers growth but also brings competition and execution risks. My biggest concern is Costco's high stock valuation, as discussed above, which leaves little room for mistakes or slower growth and could lead to a sharp drop in the stock price. For next year, my prediction is that the same forces will continue to work and that Costco will outperform the S&P 500. Part of my logic against the index is that its value has increased so quickly over the last two to three years, and it is bound to correct a bit here soon. As long as Costco's renewal rates stay high, new warehouses continue to ramp up, and digital channels add incremental volume, it has a good chance of once more finishing ahead of the index. It will not be the fastest mover in your portfolio, but if you want a consumer-facing stock with a long record of beating the S&P 500 and a business model with runway, Costco remains a strong buy.