Picking out individual stocks is never easy. What makes one stock a better choice than the other? For example, if you wanted to own stock of a big-box retailer, should you go with Costco (COST) or BJ’s Wholesale Club (BJ)? It’s impossible to declare with certainty which stock will be the winner, but there are some things to look at that can help guide the decision.

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Costco Stock vs. BJ’s Stock

When it comes to picking the right investment for your finances, there are several factors to consider. For example, Costco stock isn’t cheap, but that’s no reason to ignore this cash-generating business. Or with BJ’s stock, typically you would look at the stock with the lower P/E and deem it a bargain, however, when compared to its growth rate, it doesn’t have the earnings you may want.

Costco Stock (COST)

Stock price: $1,009.98 Market cap: $448.44 billion 52-week high: $1,078.24 52-week low: $787.85 P/E ratio: 59.01

BJ’s Stock (BJ)

Stock price: $110.14 Market cap: $14.54 billion 52-week high: $121.10 52-week low: $76.33 P/E ratio: 27.54

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Growth Potential

For better or worse, a company’s growth — specifically, its future prospects for growth — is a top factor in how its stock will get priced by the market. All other things being equal, the company growing the fastest will see its stock price perform the best. A simple way to gauge a company’s future growth is to look for the average analyst growth rates.

Many investment firms and research companies employ analysts who specialize in following a specific company. Their estimates are usually fairly accurate. In Costco’s case, analysts expect it to grow at just under 10% per year over the next five years. The estimated growth for BJ’s is 8% over the same period.

Valuation

At the end of the day, the price you pay for a stock is what will determine your return. Even the very best companies can be a bad investment if you overpay. One of the most common valuation metrics used for stocks is the price-to-earnings (P/E) ratio. BJ’s trailing P/E ratio is around 27.54, while Costco’s is 59.01 — meaning that Costco is being valued more richly by the market by a wide margin.

Final Take To GO: Which Company Has an Investment Edge?

Costco is a great company with a solid business model, making the stock a favorite for Wall Street pros or beginning investors, so you’ll rarely get a chance to buy shares for a screaming deal. Costco could be just the right addition to your portfolio now and shouldn’t be ignored even at its price point.

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On the other hand, BJ’s offers decent growth at a much lower valuation ratio than Costco, making it likely to be the better investment to get you started. Things can change fast — remember to do your own research before you commit.

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This article originally appeared on GOBankingRates.com: Costco vs. BJ’s Stock: Which Is a Better Investment?

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