PriceSmart's (NASDAQ:PSMT) Shareholders Are Down 20% On Their Shares
While it may not be enough for some shareholders, we think it is good to see the PriceSmart, Inc. (NASDAQ:PSMT) share price up 18% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 20% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
See our latest analysis for PriceSmart
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
PriceSmart saw its EPS decline at a compound rate of 5.6% per year, over the last three years. This reduction in EPS is slower than the 7.1% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on PriceSmart's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for PriceSmart the TSR over the last 3 years was -17%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
PriceSmart shareholders gained a total return of 6.8% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 2.4% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand PriceSmart better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for PriceSmart you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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.
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