Costco (NASDAQ: COST) stock price surged close to 46% in fiscal 2019 on the back of stellar financial and operational performances. The company has been topping the consensus estimates over the past couple of quarters along with awarding investors with big cash returns.
In addition, it is only among the few discount stores that are generating mid-single-digit growth in comparable sales.
Its move towards digital sales has been contributing significantly to revenue and margins growth. The company is planning to sustain the momentum in fiscal 2020 through investments in organic and non-organic growth opportunities.
Financial Growth Supports Costco Stock Price Upside
Costco reported comparable sales growth of 5.0% and the e-commerce sales grew 5.5%. Its net sales for the first quarter came in at $36.24 billion, representing a boost of 5.6% from last year’s quarter. The company has also been supporting margins and earnings through share buybacks and investment in high margin areas
Its net income stood around $1.90 per diluted share, up from $1.73 per diluted share last year. Moreover, the company appears in a position to enhance the cash returns in 2020. This is because of its strong cash generation potential.
The company reported $2.1 billion in operating cash flows in the latest quarter. Its capital expenditure stood around $765 million. Thus, the company was left with $1.4 billion in free cash flows. Its dividend payments stand around only $0.57 billion only. Thus, the huge gap in free cash flows and dividend payments offer a room for a dividend increase.
Robust Outlook Support Upside in 2020
The company expects to extend the revenue growth momentum in 2020. They are investing in organic and inorganic growth opportunities along with its supply chain network. It is expanding comparable sales growth at mid-single-digit in the past two months, which indicates robust growth trends. Overall, Costco’s stock price is receiving support from financial growth.