Costco Earnings Underwhelmed and the Stock Is Falling. It’s Time to Buy the Dip.

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  Costco earnings rarely disappoint.

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        Costco

Wholesale isn’t the kind of company that delivers much in the way of bad news and Thursday’s earnings report wasn’t anything different.

Still, Costco (ticker: COST) stock slipped 2.6% in after-hours trading on Thursday, because investors were hoping for a more than they got from the retailers earnings.

Costco posted net income of $1.87 billion for the quarter, or $4.20 a share, slightly better than analysts consensus for $4.17 a share. Sales were $70.8 billion.

That Costco pulled off a beat shouldn’t be shocking. Between its long history of upbeat earnings and robust monthly sales updates—the last of their kind among the major retailers—Costco Wholesale’s (COST) quarterly earnings results typically don’t include many surprises. That was true of its fiscal fourth quarter as well: We already learned earlier this month that the quarter’s comparable sales were up double digits when it provided its August update.

Yet anything that causes a wobble in the stock should be considered a gift for investors. While Costco shares had dropped 13% this year, that handily beats the

        S&P 500’s

21% fall, its shares, which have always fetched a premium to the market, are in no way cheap. They still change hands at more than 34 times forward earnings, around their five-year average of 33.

A negative reaction, then, shouldn’t be greeted with dismay. For those who have missed Costco’s multiyear run, or hesitate to add to their position when the stock was down earlier this year, an opportunity to get the shares a little cheaper should always be a treat, especially when there are no signs that anything is wrong with Costco’s business.

Buying on the dip has undoubtedly been a profitable bet in the recent past. Costco has climbed more than 205% in the past five…

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