A steady grower priced like a fast one

This is one of the most reliable businesses in retail: steady traffic, loyal members, disciplined pricing. The shares are priced as though reliable meant fast, and those are different things with different multiples.

What the multiple implies

A valuation this high implies growth well above what a mature retailer usually delivers, sustained for a long time. The business may keep compounding steadily. But steady compounding at a premium multiple leaves little room for the multiple itself to hold, and the multiple is doing much of the work in the returns people expect.

Quality is why the premium exists. It is not a guarantee that the premium grows.

What I'm watching

• Comparable sales, stripped of fuel and currency effects
• New warehouse openings, the long-run growth engine
• The multiple against the retailer's own history

Where I stand

Short, on valuation rather than on the business. The quality is not in question; the price asks it to be faster than it is.

What would change my mind

Growth accelerating from new markets or a new membership tier. A faster business would earn the multiple, and I would rather be wrong about the speed than about the quality.