Should You Think About Buying PriceSmart, Inc. (NASDAQ:PSMT) Now?

PriceSmart, Inc. (NASDAQ:PSMT), is not the largest company out there, but it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a US$2.2b 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? Today I will analyse the most recent data on PriceSmart’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for PriceSmart

Is PriceSmart Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18% below my intrinsic value, which means if you buy PriceSmart today, you’d be paying a fair price for it. And if you believe the company’s true value is $87.35, then there’s not much of an upside to gain from mispricing. In addition to this, PriceSmart has a low beta, which suggests its share price is less volatile than the wider market.

What does the future of PriceSmart look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. PriceSmart's earnings growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

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 its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on PSMT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that PriceSmart has 1 warning sign and it would be unwise to ignore this.

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.