3 Stable Stocks Leveling up Your Investments

NASDAQ: COST | Costco Wholesale Corporation News, Ratings, and Charts

COST – While the recent debt ceiling deal offers some respite, the stock market continues grappling with macroeconomic headwinds. Hence, it could be wise to invest in stable stocks Costco Wholesale (COST), Cintas Corporation (CTAS), and Copart (CPRT), which could withstand the ongoing market uncertainty. Read on….

Despite the potential relief from the debt crisis, the stock market is expected to witness wild swings as it continues to deal with macroeconomic challenges such as stubbornly high inflation, the Fed’s hawkish stance, and growing recession risks.

Amid an uncertain market backdrop, fundamentally sound, stable stocks Costco Wholesale Corporation (COST), Cintas Corporation (CTAS), and Copart, Inc. (CPRT) could be ideal investments now.

Lawmakers in the House of Representatives have passed the Bipartisan Bill to increase the debt ceiling, ensuring the government can meet its financial obligations. Although Senate approval is still required, the threat of a catastrophic default that could have triggered a global market meltdown has all but vanished.

While an immediate debt crisis has been averted, the array of macroeconomic issues, such as high inflation and increasing interest rates, keeping the stock market highly uncertain, have not disappeared.

Last month, the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, rose by 4.4% year-over-year, surpassing the 4.2% increase in March. The core PCE index, which excludes food and energy, also rose by 0.4% for the month and 4.7% from a year ago.

In addition, the Labor Department reported that the economy added 253,000 jobs in April, surpassing the economists’ estimates of 180,000. The unemployment rate dropped to 3.4%, its lowest level since May 1969. Average hourly wages continued their upward trajectory, climbing 0.5% for the month and reaching an increase of 4.4% year-over-year, both higher than expected.

The persistently high inflation and the labor market resilience further complicate the Fed’s endeavor to bring inflation closer to its target of 2%. The central bank has already raised its benchmark rate by more than five percentage points over the last year. The federal funds rate currently hovers between 5% and 5.25%.

The International Monetary Fund (IMF) forecasts the fed funds rate to peak at 5.4% this year. Furthermore, although Fed officials have signaled to forgo an interest rate increase in June, they have also indicated resuming hikes later in the year.

Against this uncertain backdrop, investing in fundamentally solid and stable stocks COST, CTAS, and CPRT for steady returns could be wise.

Let’s take a closer look at the fundamentals of the featured stocks:

Costco Wholesale Corporation (COST)

COST is a global retailer that operates warehouse clubs in eight countries. The company runs membership warehouses to help small- to medium-sized businesses reduce costs in purchasing for resale and everyday business use. It operates approximately 838 warehouses worldwide and also manages e-commerce websites.

On January 19, COST declared that its Board of Directors had renewed a program to repurchase common stock, with a budget of up to $4 billion. This program would be valid until January 2027, replacing the previous $4 billion program through which around $1.4 billion was already bought.

By reducing the total number of shares available, this strategic move might lead to an increase in stock prices, thereby benefiting both the company and its shareholders.

COST’s trailing-12-month Return on Common Equity (ROCE) of 28.67% is 176.3% higher than the 10.38% industry average. Likewise, the stock’s  trailing-12-month asset turnover ratio of 3.61x is 299.6% higher than the 0.90x industry average.

For the fiscal 2023 third quarter that ended May 7, COST’s net sales grew 1.9% year-over-year to $52.60 billion, while its revenue increased 2% year-over-year to $53.65 billion.

As of May 7, 2023, the company’s cash and cash equivalents stood at $12.49 billion, compared to $10.20 billion as of August 28, 2022. Its total assets amounted to $66.75 billion, up from $64.17 billion as of August 28, 2022.

The consensus revenue estimate of $241.36 billion for the fiscal year (ending August 2023) reflects a 6.4% year-over-year improvement. Likewise, the consensus EPS estimate of $14.46 for the current year indicates a 9% rise year-over-year. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters.

Shares of COST have gained 12.9% year-to-date to close the last trading session at $511.56.

COST’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

COST has a B grade for Stability. It has ranked #28 in the A-rated 37-stock Grocery/Big Box Retailers industry.

In addition to the POWR Ratings I’ve just highlighted, you can see COST’s ratings for Value, Quality, Growth, Momentum, and Sentiment here.

Cintas Corporation (CTAS)

CTAS designs fabric-based uniform programs. The company’s Uniform Rental and Facility Services segment rents and services uniforms and garments. Its First Aid and Safety Services segment provides products and services for first aid and safety. All Other includes the Fire Protection Services segment and the Uniform Direct Sale segment.

On March 8, it was announced that CTAS and Redaptive, an Energy-as-a-Service provider that installs energy-saving and energy-generating equipment, are close to completing a multi-year project to retrofit CTAS locations with LED lighting systems.

New LED installations have enabled CTAS to reduce its annual energy use at these facilities by almost 23.3 million kilowatt hours to date.  This enables CTAS to achieve substantial cost savings on energy expenses, thus, improving the company’s profitability and growth.

Also, in November 2022, CTAS inaugurated its latest Cleanroom facility in Syracuse, New York. This state-of-the-art facility is expected to strengthen the company’s East Coast operations and increase its national Cleanroom presence, enabling it to serve the region’s thriving industries and facilitate additional expansion opportunities.

CTAS’ trailing-12-month gross profit margin of 46.84% is 56.3% higher than the 29.96% industry average. Similarly, the stock’s trailing-12-month EBITDA margin of 25.56% is 76.8% higher than the 13.32% industry average.

CTAS’ net revenues increased 11.7% year-over-year to $2.19 billion for the third quarter that ended February 28, 2023. Its operating income rose 9.6% from the year-ago value to $446.81 million. The company’s net income grew 3.3% from the prior-year period to $325.83 million, while its EPS came in at $3.14, up 5.7% year-over-year.

The consensus revenue estimate of $8.79 billion for the fiscal year that ended May 2023 indicates an 11.9% year-over-year improvement. The consensus EPS estimate of $12.85 for the same period reflects a 14% rise year-over-year. Also, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

Moreover, CTAS’ revenue and EPS for the current fiscal year 2024 are expected to grow 6.8% and 11% year-over-year to $9.38 billion and $14.27, respectively. The stock has gained 18.5% over the past year to close the last trading session at $472.14.

CTAS’ positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.

CTAS has an A grade for Quality and a B for Stability and Sentiment. It is ranked #8 within the B-rated 41-stock Outsourcing – Business Services industry.

Click here to access additional CTAS ratings (Value, Momentum, and Value). 

Copart, Inc. (CPRT)

CPRT is an online auction and vehicle remarketing provider that uses Virtual Bidding Third Generation (VB3) technology to help sellers sell their vehicles online. It serves licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and the general public.

The stock’s trailing-12-month gross profit margin of 45.11% compares to the 29.96% industry average. Also, its trailing-12-month EBITDA margin of 41.61% is 212.4% higher than the 13.32% industry average.

For the fiscal 2023 third quarter that ended April 30, CPRT’s total service revenues and vehicle sales increased 8.7% year-over-year to $1.02 billion. Its operating income rose 12.4% from the year-ago value to $414.92 million. Also, the company’s net income and EPS grew 25.8% and 24.1% year-over-year to $350.43 million and $0.72, respectively. 

Analysts expect CPRT’s revenue to increase 9.7% year-over-year to $3.84 billion for the fiscal year ending July 2023. The company’s EPS for the current year is expected to grow 11.8% from the prior year to $2.49. Furthermore, the company surpassed the consensus revenue estimates in all four trailing quarters.

The stock has gained 31.6% over the past six months and 53% over the past year to close the last trading session at $87.59.

CPRT’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our pro­­­­­­­­­prietary rating system.

CPRT has an A grade for Quality and Sentiment and a B for Stability. It has ranked #5 out of 21 stocks within the B-rated Auto Dealers & Rentals industry.

Click here to access additional CPRT ratings for Growth, Value, and Momentum.

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COST shares were trading at $506.77 per share on Thursday morning, down $4.79 (-0.94%). Year-to-date, COST has gained 11.44%, versus a 10.46% rise in the benchmark S&P 500 index during the same period.


About the Author: Aanchal Sugandh


Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...


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