Costco Wholesale Corp. (COST) just had one of those weeks where the numbers tell a pretty straightforward story: strong operations lead to strong rankings. The retailer's quality score jumped from 86.58 to 94.90 week-over-week, landing it in the elite top 10th percentile of stocks for fundamental strength.

The Earnings That Moved the Needle

What sparked this climb? A fiscal first-quarter report that checked all the right boxes. Costco posted revenue of $67.31 billion, beating analyst expectations of $67.14 billion. Adjusted earnings per share came in at $4.50, comfortably ahead of the $4.27 consensus.

These quality scores measure operational efficiency and financial health based on historical profitability, and Costco's latest results gave the algorithm plenty to work with. Net sales jumped 8.2% year-over-year, while total comparable sales rose 6.4%. The company wrapped the quarter sitting on roughly $16.22 billion in cash, which certainly doesn't hurt when you're being graded on operational efficiency.

That said, the stock faces headwinds in other areas. Price trends remain weaker across short, medium, and long-term timeframes, and its value ranking sits at moderate levels.

Fighting Tariffs With Lawsuits and Private Label

While Costco's financial metrics earned it top marks, the company isn't sitting quietly on trade policy. The retailer recently filed a lawsuit against the Trump administration, challenging tariffs imposed under the International Emergency Economic Powers Act. Costco argues the levies are unlawful and is seeking a full refund.

But legal battles take time, and margins don't wait. To cushion the blow from these tariffs, Costco is accelerating production of its Kirkland Signature brand. It's a classic retailer defense strategy: when external costs rise, bring more production in-house where you control pricing and sourcing.

The combination of a "beat-and-raise" quarter and proactive responses to trade pressures reinforces why Costco maintains its reputation for operational excellence, even when navigating uncertain regulatory terrain.

Stock Performance Tells a Different Story

Here's where things get interesting: despite the fundamental strength, Costco shares are having a rough 2025. The stock is down 6.05% year-to-date, a sharp contrast to the Nasdaq Composite Index's 22.20% climb over the same stretch.

Zoom out a bit, and the picture stays bumpy. Shares have fallen 14.68% over the past six months and dropped 3.54% in the last month alone. The stock closed Tuesday at $854.79, up 0.56%, then edged down 0.05% in Wednesday's premarket session.

So you've got a company that's operationally excellent, financially solid, and willing to throw legal punches to protect its margins. Yet the market isn't rewarding that story right now. Sometimes strong fundamentals take time to translate into stock performance, especially when broader market momentum is running elsewhere.