PSMT - PriceSmart: Fairly Valuable Growth But Better Alternatives Exist

2024-03-26 11:28:53 ET

Summary

• PriceSmart operates membership warehouse clubs in Central America and Caribbean countries.
• The company has achieved good growth with stable margins. Still, the growth lags behind Costco and BJ's, meanwhile, the return on capital is lower, making the long-term appreciation worse.
• The stock is currently priced fairly with my DCF model assumptions.

PriceSmart, Inc. ( PSMT ) operates membership shopping warehouse clubs across Central America and Caribbean countries under a similar operating model as companies such as Costco Wholesale Corporation ( COST ) and Sam's Club, as well as BJ's Wholesale Club Holdings, Inc. ( BJ ) which I made a bullish write-up on in February. PriceSmart has 1.8 million members after Q1/FY2024 as per the company's Q1 investor presentation , providing stable revenues with an estimated renewal rate of 87.4%....

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