Price Smart (NASDAQ: PSMT) earnings release for the 2nd quarter of their 2020 fiscal year
Category: Stock Market and Simply Good Foods
Date: 9 April 2020 Stock Price: $58.01 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Price Smart, a membership warehouse shopping group that operates 45 warehouses across 12 countries.
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About Price Smart
PriceSmart, headquartered in San Diego, owns and operates U.S.-style membership shopping warehouse clubs in Latin America and the Caribbean, selling high quality merchandise and services at low prices to PriceSmart members. PriceSmart operates 45 warehouse clubs in 12 countries and one U.S. territory (seven each in Colombia, Costa Rica, and Panama; five in the Dominican Republic, four in Trinidad and Guatemala; three in Honduras; two each in El Salvador and Nicaragua; and one each in Aruba, Barbados, Jamaica and the United States Virgin Islands).
Overview of Price Smart 2nd quarter 2020 earnings report
- Total Revenue: $906.735 million (up from $854.425 million for the same quarter of the previous year)
- Revenue increased by 6.1% over the last 12 months
- Total Operating Expenses: $867.926 million (up from $817.899 million for the same quarter of the previous year)
- Total Operating Expenses increased by 6.4% over the last 12 months
- Some margin squeeze as the group's total revenue grew at a slower rate than their total operating expenses
- Net earnings: $25.600 million (up from $23.810 million for the same quarter of the previous year)
- Diluted earnings per share: $0.85 (up from $0.79 per share for the same quarter of the previous year)
- PE ratio of Price Smart: 17.1
- PE ratio of Price Smart: 17.1
- Diluted weighted-average shares outstanding: 30.258 million (up from 30.211 million for the same quarter of the previous year)
- Dividend declared for the quarter: $0.70
- Dividend yield of Price Smart: 5.47%
- Cash and cash equivalents: $132.845 million
- Cash and cash equivalents per share: $4.39
- Cash and cash equivalents makes up 8.6% of Price Smart's market capital
- Cash and cash equivalents makes up 8.87% of Price Smart's total assets
- Accounts receivable: $10.905 million
- Accounts receivable makes up 0.72% of Price Smart's total assets
- Inventories: $323.022 million
- Inventories makes up 21.5% of Price Smart's total assets
- Stockholders equity of Price Smart's: $818.867 million
- Stockholders equity per share for Price Smart : $27.06
- So Price Smart is trading at 1.89 times it stockholders equity per share which is outside the expected range of between 2 and 4 times most companies tend to trade at.
- For comparison, the average price to book value of the S&P 500 is 3.34 (Read more about the S&P500 here)
Price Smart's management commentary on their 2nd quarter 2020 results
SAN DIEGO, April 8, 2020 /PRNewswire/ -- PriceSmart, Inc. (NASDAQ: PSMT), operator of 45 warehouse clubs in 12 countries and one U.S. territory, today announced its results of operations for the second quarter of fiscal year 2020 which ended on February 29, 2020.
Comments from Sherry Bahrambeygui, Chief Executive Officer
"As always, and especially in response to the threats caused by the COVID-19 pandemic that we face in our 13 different markets, our top priority is to provide a safe work environment for our employees, who in turn ensure that our members have uninterrupted access to fresh, affordable food and basic goods, especially now. We have proactively taken numerous precautions to keep our warehouses clean, our members safe and our employees informed of current and developing best practices to reduce the risk of exposure. We have adopted additional and novel initiatives to provide goods and services to, and transact with, our members in ways that reduce the need for physical contact. We continuously adapt our practices to utilize our warehouse clubs and distribution centers most effectively, manage our supply chain to ensure a continued supply of essential goods, and expedite our adoption of technological innovation, despite continual changes caused by the effects of this pandemic. We also are working to deploy our workforce in a thoughtful manner, including by developing a program to teach employees skills so they can support our efforts to provide members with additional alternative ways to shop. I am so incredibly proud of the extraordinary work and selflessness of our employees at all levels of the company under extremely challenging conditions.
As noted in our March 2020 Merchandise Sales press release, we saw a significant increase in our net merchandise sales in March driven in part by initial stockpiling, primarily of foods and essentials. Following a strong start, sales moderated and later decreased in the second half of the month as various governments in our markets responded to the outbreak with travel restrictions, 'shelter in place' advisories, curfews, and social distancing measures. Many governments have imposed or are experimenting with policies and restrictions affecting the retail sectors of our markets. Many of these policies and restrictions have resulted in limiting access for our members and impacting our club operations, including temporary club closures, limits on the number of days during the week and hours per day our clubs can be open, restrictions on segments of the population permitted to shop on particular days, and limits on the number of people that can be in a club. These restrictions change day-to-day and vary from market-by-market.
Comments from Sherry Bahrambeygui, Chief Executive Officer
"As always, and especially in response to the threats caused by the COVID-19 pandemic that we face in our 13 different markets, our top priority is to provide a safe work environment for our employees, who in turn ensure that our members have uninterrupted access to fresh, affordable food and basic goods, especially now. We have proactively taken numerous precautions to keep our warehouses clean, our members safe and our employees informed of current and developing best practices to reduce the risk of exposure. We have adopted additional and novel initiatives to provide goods and services to, and transact with, our members in ways that reduce the need for physical contact. We continuously adapt our practices to utilize our warehouse clubs and distribution centers most effectively, manage our supply chain to ensure a continued supply of essential goods, and expedite our adoption of technological innovation, despite continual changes caused by the effects of this pandemic. We also are working to deploy our workforce in a thoughtful manner, including by developing a program to teach employees skills so they can support our efforts to provide members with additional alternative ways to shop. I am so incredibly proud of the extraordinary work and selflessness of our employees at all levels of the company under extremely challenging conditions.
As noted in our March 2020 Merchandise Sales press release, we saw a significant increase in our net merchandise sales in March driven in part by initial stockpiling, primarily of foods and essentials. Following a strong start, sales moderated and later decreased in the second half of the month as various governments in our markets responded to the outbreak with travel restrictions, 'shelter in place' advisories, curfews, and social distancing measures. Many governments have imposed or are experimenting with policies and restrictions affecting the retail sectors of our markets. Many of these policies and restrictions have resulted in limiting access for our members and impacting our club operations, including temporary club closures, limits on the number of days during the week and hours per day our clubs can be open, restrictions on segments of the population permitted to shop on particular days, and limits on the number of people that can be in a club. These restrictions change day-to-day and vary from market-by-market.
To best accommodate our members within these developing restrictions, we have introduced an online catalog that enables our members to see, almost real-time, the availability of products for all clubs. For certain warehouse clubs, we have launched curbside pickup and home delivery by us or in coordination with third-party delivery services. We also are launching online ordering and pick-up at club, which we refer to as "Click and Go." Where we have experienced the most significant limitations, we have offered a "drive-through" alternative with a limited offering of basic goods. We are committed to making sure our members have the essential items they need during this difficult time. However, we expect the impact of the pandemic and the related varied restrictions on our operations to adversely affect traffic and sales over the next few months.
As we disclosed yesterday, due to the uncertainty surrounding the potential impact of the outbreak on our results of operations and cash flows, we are proactively taking steps to access and preserve cash available on-hand, including, but not limited to, drawing funds on our short-term facilities and delaying strategic capital expenditures. Although we will complete the construction of our warehouse club in Liberia, Costa Rica in May 2020, we have decided to postpone the opening of that club. Additionally, with respect to our previously announced future warehouse club openings on land that we have acquired in Bogota and Bucaramanga, Colombia and in Jamaica, we have decided, at this time, to suspend or not to initiate the construction and opening of those clubs. We are considering and planning for additional cost savings measures in the U.S. and in the markets where we operate.
Even though the world looks dramatically different today than it did even a month ago, our values, our commitments and our discipline remain unchanged. We believe adhering to these core tenets will allow us to emerge from this challenging time strengthened by the experience. We wish you and your families good health and safety, as we all work together to emerge from this crisis."
As we disclosed yesterday, due to the uncertainty surrounding the potential impact of the outbreak on our results of operations and cash flows, we are proactively taking steps to access and preserve cash available on-hand, including, but not limited to, drawing funds on our short-term facilities and delaying strategic capital expenditures. Although we will complete the construction of our warehouse club in Liberia, Costa Rica in May 2020, we have decided to postpone the opening of that club. Additionally, with respect to our previously announced future warehouse club openings on land that we have acquired in Bogota and Bucaramanga, Colombia and in Jamaica, we have decided, at this time, to suspend or not to initiate the construction and opening of those clubs. We are considering and planning for additional cost savings measures in the U.S. and in the markets where we operate.
Even though the world looks dramatically different today than it did even a month ago, our values, our commitments and our discipline remain unchanged. We believe adhering to these core tenets will allow us to emerge from this challenging time strengthened by the experience. We wish you and your families good health and safety, as we all work together to emerge from this crisis."
Price Smart (NASDAQ: PSMT) stock price history
The image below, obtained from Google, shows the stock price history of Price Smart over the last 5 years. And it's not been a very good time for Price Smart stockholders. 5 years ago the stock of Price Smart was trading at around $82 a stock and its currently trading at $58.01 a stock. That's a decent return of 42.8% provided by Price Smart to its stockholders over the last 5 years.
The stock of Price Smart is trading at a lot closer to its 52 week low of $41.15 than it is to its 52 week high of $79.90 which to us is a clear indication that the short term momentum and sentiment of Price Smart is very negative right now, as is the case with most listed stocks considering the significant market sell offs we have seen triggered by the global Coronavirus pandemic. Read more about the market sell off here.
The stock of Price Smart is trading at a lot closer to its 52 week low of $41.15 than it is to its 52 week high of $79.90 which to us is a clear indication that the short term momentum and sentiment of Price Smart is very negative right now, as is the case with most listed stocks considering the significant market sell offs we have seen triggered by the global Coronavirus pandemic. Read more about the market sell off here.
Recent coverage of Price Smart
The extract below shows some of the latest coverage on Price Smart from YahooFinance.com
Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding PriceSmart, Inc. (NASDAQ:PSMT).
Is PriceSmart, Inc. (NASDAQ:PSMT) the right pick for your portfolio? Money managers are betting on the stock. The number of long hedge fund bets inched up by 8 recently. Our calculations also showed that PSMT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to
Read the full article here
Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding PriceSmart, Inc. (NASDAQ:PSMT).
Is PriceSmart, Inc. (NASDAQ:PSMT) the right pick for your portfolio? Money managers are betting on the stock. The number of long hedge fund bets inched up by 8 recently. Our calculations also showed that PSMT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to
Read the full article here
Price Smart (NASDAQ: PSMT) latest stock valuation
So what is Price Smart stock worth based on the release of their latest earnings report and their outlook provided. Based on their earnings report and the outlook provided our valuation model provides a target price (full value price) for Price Smart of $47.70 a stock. We therefore believe that the stock is overvalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $47.70. So a good entry point into Price Smart stock would be at $42.90 or below.
We expect the stock of Price Smart to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $47.70. So a good entry point into Price Smart stock would be at $42.90 or below.
We expect the stock of Price Smart to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release for Price Smart
It is expected that Price Smart will release their 3rd quarter 2020 earnings report in early July 2020