PriceSmart Earnings Should Send the Stock to New Highs
PriceSmart will release its latest quarterly report on Wednesday, and investors are already optimistic about the company's prospects, having bid shares up to all-time highs. But for the stock to climb from here, PriceSmart earnings need to keep giving shareholders the growth they crave.
PriceSmart has tapped into the emerging-market hunger for a source for inexpensive and plentiful consumer goods, with its warehouse locations scattered throughout Central America and the Caribbean. As the company looks to expand further southward, PriceSmart could eventually make inroads into more of the higher-growth areas of South America. Let's take an early look at what's been happening with PriceSmart over the past quarter and what we're likely to see in its quarterly report.
Stats on PriceSmart
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Will PriceSmart earnings keep climbing?
Analysts have had mixed views in recent months about PriceSmart's earnings prospects. They've trimmed a penny per share from their May-quarter estimates, but they've boosted their full year 2013 views by the same penny. The stock has responded quite favorably, climbing almost 15% since early April.
Most of those gains came in April, following PriceSmart's favorable report from the previous quarter. Same-store sales growth managed to come in at almost 8% for the quarter, showing how effective PriceSmart has been in its balancing of opening new locations while making the most of its existing stores. Overall, PriceSmart boosted sales by almost 11% but saw earnings growth of 22% as the retailer showed off its margins. That trend has continued this quarter, with comparable sales jumping 9.8% in May.
Given its high-price valuation of nearly 28 times next year's forward earnings estimates, though, PriceSmart needs that level of growth to continue in order to support its share price. One big prospective area for growth is South America, where PriceSmart has only recently started to establish a presence with three stores in Colombia. Yet rival Wal-Mart is an obstacle to PriceSmart as it moves southward, with Wal-Mart dominating the huge Brazilian market and also looking to push into some of PriceSmart's traditional areas of strength. Costco has respected the traditional dividing line between the two halves of the once-unified business and doesn't pose a competitive threat in Latin America, giving PriceSmart relief from what could be an even more difficult potential competitor to hold off.
In the coming report on PriceSmart earnings, watch for the retailer to discuss its intended pace of expansion both within its current Central American and Caribbean markets and in South America. Seeing which strategy it emphasizes should give you clues as to PriceSmart's overall prospects for growth in the near future.
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The article PriceSmart Earnings Should Send the Stock to New Highs originally appeared on Fool.com.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Costco Wholesale and PriceSmart and owns shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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