Shares of (NASDAQ: COST) have significantly outperformed the broader market, soaring 200% over the last five years. This roughly doubles the 's return over the same period. Since reaching a 52-week high of $1,078 earlier this year, the stock has pulled back to $970 as of July 11.

Costco's sales accelerated following the pandemic, and that momentum continued over the past few years. Between fiscal 2010 and 2019, revenue grew at an annualized rate of about 8%.

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But from fiscal 2019 through fiscal 2024, sales have increased close to 11% per year. This fueled investor enthusiasm for this world-class retail business, especially given that Costco still has a lot of opportunities to expand through e-commerce and nonfood sales.

But the stock isn't cheap and trades at a high earnings multiple. With shares hovering around $1,000, is Costco still worth buying -- and, more importantly, can a new investor buying shares today expect a good return in the long run?

Costco has a wide competitive moat that protects the business from rival retailers stealing customers away. It earns most of its profit from annual fees from nearly 80 million paying households and growing. This allows management to sell food and other merchandise at rock-bottom prices, and this successful formula is still fueling the company's expansion after four decades.

It ended the recent quarter with 914 warehouses worldwide, which is not that many in the context of big-box retail. Even has over twice that many stores. Costco is still opening new locations, currently targeting high-quality markets like Sweden, Japan, South Korea, and Canada. It plans to open 24 net new warehouses for the August-ending fiscal year.

Global expansion is just one growth opportunity. The chain is also seeing double-digit annual percentage gains from online sales. E-commerce increased nearly 16% year over year last quarter. This boost is not only fueling Costco's overall sales, but management is also still squeezing more profit out of the e-commerce business, which could benefit bottom-line earnings over the long haul.

Another opportunity is non-food sales. For example, the company experienced significant demand last year for gold and silver, which boosted revenue.

This highlights another advantage: identifying exciting new items to delight Costco customers and keep them coming back. It reported double-digit sales growth in several non-food categories last quarter, including jewelry, toys, and home goods.

The only problem for investors looking at the stock is the expensive valuation. Using this year's consensus earnings estimate from Wall Street analysts, the stock trades at 54 times forward earnings. That is far above the 26 forward price-to-earnings ratio (P/E) for the S&P 500.

Assuming that the market has it right and Costco's stock is worth a high multiple, it's still difficult to justify buying shares right now. The current P/E is well above the five-year average multiple of 44.

This high and rising valuation leaves little room for error on Costco's part. Two of its strengths over the past year -- e-commerce and non-food sales -- are seeing slowing sales momentum this year, which could cause the stock to fall or at least underperform the S&P 500.

Total sales grew 8% year over year through the first three quarters of fiscal year 2025, which is lower than its five-year average rate of 11%. Analysts expect earnings to increase at an annualized rate of 9% over the long term.

Companies usually don't sustain high P/Es with single-digit earnings growth. It could lead to disappointing returns, paying a significant premium to the S&P 500 P/E for fairly average growth prospects.

Sure, Costco can grow for a long time due to its competitive strengths, but I would wait for a more attractive price to make a long-term investment. At the current valuation, you shouldn't expect to earn a return that exceeds the company's long-term earnings growth.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Home Depot. The Motley Fool has a disclosure policy.