Is Now An Opportune Moment To Examine PriceSmart, Inc. (NASDAQ:PSMT)?

PriceSmart, Inc. (NASDAQ:PSMT), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. The recent jump in the share price has meant that the company is trading around its 52-week high. As a US$2.5b market cap stock, it seems odd PriceSmart is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at PriceSmart’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for PriceSmart

Is PriceSmart Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 21.69x is currently trading slightly above its industry peers’ ratio of 19.3x, which means if you buy PriceSmart today, you’d be paying a relatively reasonable price for it. And if you believe that PriceSmart should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like PriceSmart’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will PriceSmart generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 60% over the next couple of years, the future seems bright for PriceSmart. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in PSMT’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at PSMT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on PSMT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for PSMT, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for PriceSmart from their most recent forecasts. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in PriceSmart, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.