Both Costco and Home Depot are considered wide-moat companies. Based on our valuation models, the current intrinsic value for Costco is $538.21, while Home Depot’s intrinsic value stands at $230.81. These values are derived from our estimated long-term CAGR assumptions of 8.78% for Costco and 6.28% for Home Depot.
At Costco’s current market price of around $894.68, investors appear to be pricing in an expected YOY growth rate of 17%—which is roughly 9% above Costco’s historical average. In contrast, at Home Depot’s market price of $354.61, the implied YOY growth expectation is only 12%, about 6% above its historical trend.
When we compare earning power, the picture becomes even more interesting. Home Depot generates $14.66 in earnings for its 995 million outstanding shares. Costco, despite having roughly half the number of shares, does not produce double the EPS of Home Depot. This suggests that Home Depot currently delivers stronger earnings power than Costco.