Tuesday's IBD 50 Stocks To Watch pick, Costco Wholesale, is approaching a new buy point during the current stock market correction. COST shares at one point rallied 2% Tuesday, moving closer to the new entry.
Stocks To Watch: Costco
Washington-based Costco operates more than 800 wholesale membership warehouses throughout the world, but primarily in the U.S.
Costco reported earnings on March 3 after the market closed. The company earned $2.92 a share on sales of $51.9 billion. EPS jumped 36% year over year, while sales rose 16% vs. the year-ago period.
"Despite all the supply chain issues, we're staying in stock and continue to work to mitigate cost and price increases as best we can," commented Chief Financial Officer Richard Galanti in the fiscal second-quarter conference call.
Moving to inflation, Galanti commented, "The inflationary pressures that we and others continue to see include higher labor costs, higher freight costs, as well as higher transportation demand ... . For the second quarter and talking with senior merchants, estimated overall price inflation was in the 6% range."
Join IBD experts as they analyze leading stocks in the stock market correction on IBD Live
Costco's IBD Stock Ratings
Costco ranks No. 23 in the IBD 50. (The IBD 50 is a list of leading growth stocks with strong relative price strength and top-notch fundamentals.)
The stock shows a solid 90 out of 99 Earnings Per Share Rating with a modest C SMR Rating, according to IBD Stock Checkup. The EPS Rating tracks a company's short- and long-term earnings performance. The SMR Rating analyzes a company's sales, margins and return on equity, and offers a letter grade from A (the best) to E (the worst).
In addition, the company boasts two quarters of accelerating earnings growth, from 11% to 30% to 36%, which is a key fundamental metric ahead of a potential breakout.
IBD Stock Checkup also shows that COST stock has a 94 out of a maximum 99 IBD Composite Rating. The Composite Rating helps investors easily gauge the quality of a stock's fundamental and technical metrics.
Stock Market ETF Strategy And How To Invest
COST Stock Eyes New Buy Point
Costco stock continues to build a cup base with a 571.59 buy point, according to IBD MarketSmith chart analysis. COST shares rallied 0.7% midday Tuesday and are about 6% away from the new buy point. Keep an eye out for a handle to form, which would lower the risk-optimal entry.
Bullishly, the stock's relative strength line is already at new highs, a sign of extreme strength especially during periods of significant market weakness. The RS line measures the stock's price performance vs. the S&P 500.
Keep in mind that current stock market conditions should keep investors in cash and on the sidelines. A stock market correction is not an ideal time to aggressively buy breakouts.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
