Costco (COST), Overvalued by 46x?...Jim Cramer "Wait Longer to Buy"

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Jim Cramer diagnosed Costco Wholesale Corporation (COST) as having an "expensive trading price." His judgment is that instead of blindly chasing the stock price, one should aim for a period where the valuation burden decreases to a price-to-earnings ratio of 45x.

According to the economic media outlet Insider Monkey on July 9 (local time), Cramer stated that one should pay attention to the characteristic of Costco's stock price movement, where periods of sluggishness and strong surges repeat. He said, "The current price-to-earnings ratio is 46x. If it drops to 45x, you will see a big upward movement," adding, "It's a bit too expensive."

Cramer revealed that he has held Costco in his charitable trust for a long time. He emphasized a strategy of using the time when the valuation becomes attractive as a buying opportunity, rather than reversing investment decisions based solely on short-term stock weakness.

Previously, in a broadcast on June 8, he presented a similar approach. When asked about the appropriate time to buy Costco, Cramer said, "Buy a little now and hope the price-to-earnings ratio drops to 45x," adding, "I want value in investing just as I want value in stores."

He drew a line against investing all funds at once. Cramer explained, "My investment method is to let Costco's stock drop a bit more after starting the investment," and "The worst-case scenario is the stock immediately jumping from $974 to $1,025, missing the buying opportunity."

Cramer's judgment focused on Costco's valuation being higher than its business competitiveness. He suggested a staggered buying strategy, anticipating strong upward movement in the 45x P/E ratio range while cautioning against price burden at 46x P/E ratio.

[Article Summary]

-Jim Cramer evaluated Costco as "a bit too expensive" at a price-to-earnings ratio of 46x.

-Cramer predicted that if the price-to-earnings ratio drops to 45x, a significant upward movement could occur.

-He suggested a staggered buying strategy, buying a portion first and waiting for further declines, rather than buying all at once.

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