When you drive by Walmart or Petco every day, it’s easy to think of them when researching stocks. But when you’ve never heard of a company because it doesn’t operate in America, you might miss out on some fabulous opportunities. Which is what brings Paul Price to PriceSmart (PSMT) - Get PriceSmart, Inc. Report.
“Most people are not aware that Costco grew much bigger back in 1993 by merging with Price Club. Price wrote recently on Real Money. "After a few years of dual branding, only the Costco name survived."
The merger did not include Price Club's non-U.S. operations. Those were spun-off as PriceSmart, which continued to operate quite successfully in the Caribbean and Latin America.
“It's quite noteworthy that the value created since 2011 is barely reflected in the current quote," Price wroted. "That indicates some serious price-to-earnings compression occurred. That was bad news for long-time, continuous owners but great news if you're thinking about getting in now.”
He added that “PSMT rarely trades at low multiples. From 2011 through 2020, it averaged 28.5-times earnings while yielding about 0.9%. The stock's best buying opportunities… typically came with P/E's ranging from 20-times to 25-times. The two exceptions came during the European banking crisis of 2011 and at the COVID-panic low of March 2020.”
When PSMT was in favor with traders… it generally peaked between 31-times and 45-times earnings at those "should have sold" moments.
As of Monday morning on Oct. 18, PSMT was offered for just $77.58, around 21.3-times its fiscal 2022 estimate. That represented about a 25% discount to its normalized level.” Shares are down even further since Price’s piece first appeared on Real Money.
“PriceSmart is neither the very cheapest, nor the one with the largest upside of all the stocks I write about. It does offer high-quality and a better than money market yield with just a small degree of risk,” Price noted.