12:11 PM EDT, 09/27/2024 (MT Newswires) -- Costco Wholesale's ( COST ) premium valuation is partly due to its "continued market share gains" and consistent core margin improvements, UBS said in a note Friday.

"These factors have driven a substantial improvement in Costco's Return on Incremental Invested Capital ("ROIIC") over the last several years," UBS said. Costco's ROIIC increased by approximately 50% since 2019, the firm added.

Costco Wholesale ( COST ) reported fiscal Q4 earnings beat late Thursday of $5.29 per diluted share, against analyst expectations of $5.06. Costco reported another strong quarter, achieving significant market share gains with worldwide traffic up 6.4% year-over-year and US traffic rising 5.6%, UBS said.

"During the fourth quarter, it continued to generate gains across its P&L while it still invested for the future. Thus, we think the shares should continue to trade at a premium multiple and its stock can be driven by further earnings gains," UBS said.

UBS maintained a buy rating on Costco's stock with a $940 price target.

Costco shares fell 1.8% in recent trading.

Price: 885.18, Change: -16.26, Percent Change: -1.80