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For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on PriceSmart, Inc. (NASDAQ:PSMT) useful as an attempt to give more color around how PriceSmart is currently performing.
Did PSMT's recent performance beat its trend and industry?
PSMT's trailing twelve-month earnings (from 28 February 2019) of US$75m has increased by 1.5% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -4.1%, indicating the rate at which PSMT is growing has accelerated. What's enabled this growth? Let's take a look at whether it is solely owing to industry tailwinds, or if PriceSmart has experienced some company-specific growth.
In terms of returns from investment, PriceSmart has fallen short of achieving a 20% return on equity (ROE), recording 9.9% instead. However, its return on assets (ROA) of 6.3% exceeds the US Consumer Retailing industry of 5.9%, indicating PriceSmart has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for PriceSmart’s debt level, has declined over the past 3 years from 22% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 12% to 12% over the past 5 years.
What does this mean?
PriceSmart's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. I suggest you continue to research PriceSmart to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PSMT’s future growth? Take a look at our free research report of analyst consensus for PSMT’s outlook.
- Financial Health: Are PSMT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 28 February 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.