Costco has a P/E ratio of 25. This is hands down better than their peers.
Basically what this is showing is that investors are willing to +60% more to own Costco over its competitors.
Top down thinking can be good because it helps people abstract away some complexity and take shortcuts. On the other hand, top down thinking can be bad, after all its lossy compression and what is lost in the compression algorithm might be quite useful. Assumptions in top down models should always be compared to bottom up findings.
I was thinking this the other day when I overheard this pithy summary of Costco - they have fewer stores, less selection, less ways to pay and pay their employees more.
If you drew up a business plan saying - I am going into the hyper competitive retail space to compete against the likes of Target and Walmart, I am going to charge people to walk in the door, I am only going to accept one kind of credit card, I will have far less selection, far fewer stores, and I will pay my employees more (plus healthcare benefits!) - you would get laughed out of any business school in the world. But that's what they did and though it flew in the face of any MBA top down model - they beat competition hands down.