In the retail sector, Costco (COST -0.08%) has been one of the biggest long-term winners. A favorite of Warren Buffett's late partner, Charlie Munger, Costco's killer business model, low-price ethos, and consistent growth even in a tough retail environment have made for another winning year in 2024.

But with the stock up another 50.8% in 2024 and Costco's share price recently touching $1,000 per share, are shares still a buy?

Make no mistake, Costco isn't a cheap stock. Shares currently go for a whopping 58 times earnings. That type of valuation is usually reserved for high-growth tech companies, not large and mature retailers.

The high P/E ratio comes despite Costco growing revenue just 5% last year, with analysts expecting just 7% growth each of the next two years.

While accelerating mid-to-high single-digit growth is nothing to sneeze at, it certainly doesn't seem to justify Costco's kind of multiple.

Even though revenue is only growing in the mid-to-high single-digits, Costco's earnings are growing much faster, up 17% in fiscal 2024.

The company is obviously generating terrific operating leverage and margin expansion. This could be because Costco is an incredibly low-margin company to start with, thanks to its membership business model and rigorous commitment to having the lowest prices anywhere. With tiny margins, any small improvement can lead to big profit growth.

Remember, Costco is a membership club whereby customers pay a modest annual fee for access. The price of a standard Gold Star membership was just raised from $60 to $65 -- the first price increase in seven years. However, that's still a bargain, considering the wide variety of heavily discounted items Costco sells.

Costco leans heavily on its membership fees for profitability; in fiscal 2024, Costco's $4.8 billion in membership fees accounted for 52% of the company's $9.3 billion in operating income. But that stream of membership fee income enables Costco to sell its merchandise at microscopic margins. In 2024, Costco had just an 11% merchandise gross margin and just a 1.8% merchandise operating margin.

That margin is extremely difficult for non-membership-based retailers to compete with, and it's also why Costco continues to attract more and more customers, generating operating leverage on its existing real estate.

Operating at such low margins means even a small amount of margin expansion could lead to a big difference in profits. For instance, if profit margins just went from 1.8% to 1.9%, that would be a 5.6% additional increase to profit growth on top of however much the company's top line grows.

So as long as Costco keeps expanding its store count, adding new merchandise, attracting more members and generating same-store sales growth, profits should continue growing at a higher rate than sales. Meanwhile, the 8.3% July membership price hike should help boost profits even further in fiscal 2025.

Costco generated $250 billion in sales last year and has a market cap of $440 billion, so many investors may be skeptical that it can keep growing at a solid rate given its massive size.

But that may be short-sighted. Of its 897 stores that will be open by the end of 2024, 617 are in the United States and 767 are in North America.

That leaves a lot of space internationally, and Costco is methodically expanding in many countries throughout Europe and Asia, where Costco remains very under-penetrated. Asia appears to be a particularly huge opportunity; of the 29 locations opened in 2024, 23 were U.S. locations and six were international. Of those six, five were in East Asia, with two each in China and Japan, and one in Korea.

China represents a potentially massive growth opportunity. Costco only opened its first store in China in 2019, but has already expanded to seven stores. Given that China has four times the population of the U.S. and that Chinese consumers appear to be enthusiastically embracing Costco, one can easily see Costco growing its China store count beyond that of the U.S. over the long-term.

Given that there are already over 600 U.S. stores, China appears to represent a massive decades-long growth opportunity.

But there are still growth opportunities even in the U.S. On the recent first quarter 2025 conference call with analysts, new CEO Rob Vachris pointed out the success of Costco's new Pleasanton, CA store. The store was recently opened between three very high-volume stores in the East Bay across from San Francisco. What Vachris explained was that the new store initially took "pressure" off of the three surrounding stores, but when those stores became less crowded, the experience became better and those stores soon filled back up, leading to incremental revenue and profit.

I'm not saying Costco's stock couldn't pull back in a big way, given its high valuation. However, for those with a long-term mentality, Costco still looks like a high-quality stock one can feel good buying today -- even near $1,000 per share.

With its resilient business model and opportunities for both multi-decade growth and profit expansion, the stock isn't as wildly expensive as it might appear.