The Latin American wholesaler has fallen on tough times, but that could be a good thing for investors.
Text of Why PriceSmart Might Finally be a Buy
PriceSmarts Lackluster Quarter
Why Wall Street Isnt Happy While PriceSmart met earnings expectations, it missed on revenue and has shown a steady decline in same-store sales.
Steady Decrease in Same-Store Sales
Why the Drop? 1. Management has stated that the opening of new stores in Costa Rica and Honduras were going to shrink same-store sales while boosting overall sales. This was because the new stores would cannibalize the older stores. 2. The company has produced years of high single- digit and low double-digit growth. That pace cant be held up forever.
A Buying Opportunity? PriceSmarts P/E Hasnt Been This Low Since Mid-2011
The Bullish Argument There are two key things to keep in mind: 1. The real growth story comes from opening up stores in South America, where the company is doubling its presence by years end. 2. With only 31 stores in the comparative base, its easy for one or two stores falling behind to make a big difference in overall same-store sales.
What to Beware Of If they only grow at 1% per year, this stock isnt worth 28 times trailing earnings. Same-Store Sales
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