Costco Wholesale Corporation (COST) vs Exxon Mobil Corporation (XOM): 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%. XOM is overvalued at $138, with an intrinsic value of $109 and a margin of safety of -26%. Of the two, XOM 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.
- ★Altman Z-Score of 4.16 indicates very low bankruptcy risk — the company is firmly in the safe zone.
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.
- ⚠ROIC has declined by 12.0 percentage points over the past 4 years, which may signal competitive erosion.
- ⚠Buybacks have been poorly timed — 3 out of 4 years involved repurchases at relatively expensive valuations.
- ⚠Trailing P/E of 23.2x is 81% above the historical average of 12.8x — the stock trades at a premium to its own history.
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 $138?
Market pricing in significantly higher growth than history — aggressive.
Economic Moat Score
Learn more →Wide moat with strength across all dimensions. ROIC Consistency is the standout factor.
Narrow moat with reinvestment efficiency as the key competitive advantage. Improving margin stability 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 XOM
Is Costco Wholesale Corporation or Exxon Mobil Corporation more undervalued in 2026?▼
Based on our discounted cash flow model, XOM trades at a -26.4% margin of safety (intrinsic value $109 vs. price $138), compared to COST's -110.9% margin of safety (intrinsic $451 vs. $951).
Which stock has a wider economic moat, Costco Wholesale Corporation or Exxon Mobil Corporation?▼
COST scores 96/100 (Wide moat), while XOM scores 48/100 (Narrow moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Which company has better free cash flow, Costco Wholesale Corporation or Exxon Mobil Corporation?▼
Exxon Mobil Corporation (XOM) generates a 4.1% 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 Exxon Mobil Corporation?▼
COST earns 31.3% ROIC versus XOM's 5.3%. 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 Exxon Mobil Corporation's?▼
COST's dividend earns a safety score of 85/100 (Very Safe), compared to XOM's 69/100 (Safe). COST has raised its dividend for 0 consecutive years.