Mega-retailer Costco has scaled great heights, but is in the middle of a 15% drawdown.
Ubiquitous beverage maker Coca-Cola is seeing its shares trade near all-time highs.
A closer look at key metrics shows one of these two stocks is far more attractive now.
10 stocks we like better than Costco Wholesale ›
Costco Wholesale(NASDAQ: COST) and Coca-Cola(NYSE: KO) are both reliable long-term performers. Right now, however, the two stocks are heading in vastly different directions. Costco is trending lower, off from its 52-week high by around 15%. Coca-Cola is trending higher, below its all-time highs by just 3% or so.
Here’s why more investors will probably prefer Coca-Cola right now.
Even after the recent drawdown in Costco’s share price, it’s still only offering a dividend yield of 0.6%. That’s half the level of the S&P 500, and well below Coca-Cola’s nearly 2.9% yield. Coca-Cola’s yield is only about average for the soda maker in recent years, but it is a touch better than the 2.7% of the average consumer staples stock, using the Consumer Staples Select Sector SPDR ETFÂ as an industry proxy.
Image source: Getty Images.
From a yield-only perspective, Coca-Cola is the winner. However, it also excels in dividend consistency, having increased its dividend annually for over six decades. That streak is enough to make it a Dividend King. While Costco is no slouch on the dividend front, with 21 annual dividend hikes behind it, it’s still nearly three decades away from achieving Dividend King status.
When you examine the valuations of Coca-Cola and Costco, Coca-Cola again emerges as the top performer. Currently, Coca-Cola’s price-to-earnings (P/E) and price-to-book value (P/B) ratios are both below their five-year averages. Its price-to-sales (P/S) ratio is roughly even with its five-year average.
In comparison, Costco’s P/S, P/E, and P/B ratios are all above their five-year averages, despite the 15% decline in its stock price. From a valuation perspective, Costco looks expensive and Coca-Cola looks fairly priced to a little cheap.
Dividend lovers and value investors will probably prefer Coca-Cola over Costco right now. However, growth and dividend growth investors may be tempted to opt for Costco. Coca-Cola’s average annualized dividend growth over the past decade was a healthy 5% or so. However, Costco’s is double that, with annualized dividend growth of approximately 12% over the past decade. The actual dividend is lower, but the dividend growth is way more attractive.
Looking simply at growth, Coca-Cola’s revenue has essentially remained flat over the past decade, while its earnings rose by a little over 4% per year on an annualized basis. That’s not hugely compelling, even though the company is still growing its earnings. Costco’s revenue grew at an annualized rate of around 9% over the last decade, with its earnings expanding at a roughly 13% annualized clip.
Costco’s growth story is a lot more interesting, as it benefits from opening new stores as it expands geographically. Coca-Cola, in comparison, has pretty well saturated the global beverage market. Modest, though slow and steady, earnings growth is probably the best you can expect.
What’s interesting about Costco today is that its shares are down approximately 15%. This is the seventh such drawdown over the past decade. Although the last drawdown went a lot further, pulling the stock down over 20% and into its own personal bear market, history indicates that Costco will eventually rebound and push to higher highs. If you think in decades, not days, Costco is probably an attractive growth stock, even if you end up paying a premium for the shares.
Coca-Cola and Costco both operate good businesses, though they are drastically different companies. From a dividend investor’s point of view and from the guise of a value investor, Coca-Cola is likely to be a more attractive investment than Costco today.
From a growth investing perspective, however, Costco emerges as the long-term winner. Just understand that you will pay a premium if you purchase the stock today. If that’s not OK with you, then put it on your wishlist and hope that the current 15% price decline keeps going. If the drawdown reaches 20%, the stock might become a little more interesting.
Before you buy stock in Costco Wholesale, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Costco Wholesale wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $599,784!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,165,716!*
Now, it’s worth noting Stock Advisor’s total average return is 1,035% — a market-crushing outperformance compared to 191% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of November 10, 2025
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
Best Stock to Buy Right Now: Costco vs. Coca-Cola was originally published by The Motley Fool
