Costco Wholesale Corporation (COST) vs RTX Corporation (RTX): Which Is the Better Buy in 2026?
As of 2026-06-19, COST is overvalued at $951, with a DCF intrinsic value of $451 and a margin of safety of -111%. RTX is overvalued at $186, with an intrinsic value of $119 and a margin of safety of -56%. Of the two, RTX has the wider margin of safety.
Rewards
- ★Costco Wholesale Corporation has maintained ROIC above 15% for 4 consecutive years, indicating a durable competitive advantage.
- ★Costco Wholesale Corporation scores 96/100 on the Economic Moat Score (Wide Moat), with roic consistency as the strongest competitive dimension.
- ★Free cash flow has grown at a 30.8% CAGR over the past 4 years, demonstrating strong earnings power growth.
- ★Free cash flow has grown at a 19.2% CAGR over the past 4 years, demonstrating strong earnings power growth.
- ★Each dollar of retained earnings has created $3.48 of earning power — management is an exceptional capital allocator.
Risks
- ⚠Gross margin of 12.9% is low, suggesting a competitive or commodity-like market with limited pricing power.
- ⚠Despite buyback spending, shares outstanding increased in 3 out of 4 years — stock-based compensation is offsetting repurchases.
- ⚠FCF yield of 1.6% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠Gross margin of 20.2% is low, suggesting a competitive or commodity-like market with limited pricing power.
- ⚠FCF yield of 2.9% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠PEG ratio of 2.56 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $951?
The market implies +20.7% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +22.8%, reflecting heavy growth investment.
What growth rate is the market pricing in at $186?
The market implies +15.4% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +16.8%, reflecting heavy growth investment.
Economic Moat Score
Learn more →Wide moat with strength across all dimensions. ROIC Consistency is the standout factor.
Narrow moat with revenue predictability as the key competitive advantage. Improving roic consistency would strengthen the moat.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is pricing this stock without strong emotion in either direction"
"Market is pricing this stock without strong emotion in either direction"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: COST vs RTX
Is Costco Wholesale Corporation or RTX Corporation more undervalued in 2026?▼
Based on our discounted cash flow model, RTX trades at a -56.1% margin of safety (intrinsic value $119 vs. price $186), compared to COST's -110.9% margin of safety (intrinsic $451 vs. $951).
Which stock has a wider economic moat, Costco Wholesale Corporation or RTX Corporation?▼
COST scores 96/100 (Wide moat), while RTX scores 51/100 (Narrow moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is RTX Corporation in financial distress?▼
RTX's Altman Z-Score of 2.6 places it in the Grey zone, signaling elevated bankruptcy risk. COST scores 9.2 (Safe zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which company has better free cash flow, Costco Wholesale Corporation or RTX Corporation?▼
RTX Corporation (RTX) generates a 2.9% free cash flow yield, compared to Costco Wholesale Corporation's 1.6%. A higher FCF yield means the business converts more of its market value into cash that can be returned to shareholders or reinvested.
Which stock has higher return on invested capital, Costco Wholesale Corporation or RTX Corporation?▼
COST earns 31.3% ROIC versus RTX's 8.8%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.
Which dividend is safer, Costco Wholesale Corporation's or RTX Corporation's?▼
COST's dividend earns a safety score of 85/100 (Very Safe), compared to RTX's 78/100 (Safe). COST has raised its dividend for 0 consecutive years.