PriceSmart, Inc. (PSMT): what the price assumes

In the published model solve dated 2026-Q2, anchored at $169.34, PriceSmart, Inc. (PSMT) is priced for +13.4% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/PSMT

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=18)

Solvency

Bullet Takeaways

• The counterintuitive point is that a 22 times operating-income price embeds about 16% annual operating growth, a pace that looks aggressive for a retailer until you see PriceSmart has actually delivered it. The bet is on duration, not on the rate.
• The balance sheet is pristine for a retailer: net cash of about $139 million, no net debt, and interest coverage near 17 times. The growth is being funded internally as the company expands its warehouse club count.
• Recent results stayed strong, with second-quarter fiscal 2026 revenue up 9.7% to $1.50 billion, comparable merchandise sales up 7.6%, and membership accounts up 6.7% past 2 million. The model keeps compounding in markets where it has few direct competitors.

Bull Case

The surprising thing about PriceSmart is that a price implying roughly 16% annual operating growth is actually within what this retailer has delivered, which is rare for a bricks-and-mortar business. The market is paying about 22 times operating income, and the inversion reads that as within range rather than stretched, because the company's own record supports the pace. The stretch is duration, not rate, and the membership warehouse model is unusually good at sustaining duration. The numbers back it: second-quarter fiscal 2026 revenue rose 9.7% to $1.50 billion, comparable merchandise sales grew 7.6%, and net income climbed to $49.1 million. A retailer growing comps in the high single digits while opening clubs is compounding on two axes at once.

The model is a recurring-revenue machine wrapped in a retailer. Members pay annual dues for the right to buy, which front-loads loyalty and smooths the income. The economics are reinforced by tiered membership: the 10-K describes a Platinum rebate program where members earn up to "an annual maximum of $500" that "can apply this rebate to future purchases at the warehouse club" (FY2025 10-K, accession 0001041803-25-000060), a structure that pulls members up the value ladder and locks in repeat spend. Membership accounts grew 6.7% past 2 million in the recent quarter, with Platinum penetration rising, which is exactly the leading indicator a membership business wants to see.

The geographic position is the deepest part of the moat. PriceSmart operates clubs across Central America, the Caribbean, and Colombia, markets where it often faces little direct warehouse-club competition and where a rising middle class is adopting the format. Real estate is part of the edge, since the company must "compete with other retailers and businesses for suitable locations" against "local land use, environmental and other regulations" (accession 0001041803-25-000060), so each established, well-sited club is hard to replicate. With a debt-free balance sheet carrying about $139 million of net cash and interest coverage near 17 times, the company funds its club expansion internally. A self-funding compounder in underpenetrated markets is the bull case in one line.

Bear Case

The risk worth leading with is that PriceSmart may be earning at a cyclical high, and the price assumes that high persists. Comparable sales in the high single digits and double-digit revenue growth are excellent, but they have come during a period of strong consumer demand and elevated inflation in its markets, both of which flatter a retailer's top line. The price requires roughly 16% operating growth for five years, and history says only about 43% of comparable fast-growers sustained even that medium run. If the demand cycle in Central America and the Caribbean cools, or if inflation that has been padding nominal sales recedes, the comp engine slows and a 22 times multiple on operating income starts to look full rather than fair.

The valuation already leans on the optimistic frames. The relative-multiple and growth-DCF views support the price, but the asset-based and earnings-power frames read it as expensive, sitting well below the current quote. That split is the bear's evidence: strip out the growth assumption and the static economics do not justify $182 (June 27, 2026). The current operating margin is a modest 4.5%, typical for a warehouse club that runs on thin markups and volume, which means there is little margin cushion if cost inflation, freight, or competitive pricing pressure the gross line. A small margin business priced for years of growth has little room to absorb a bad stretch.

The structural risks are concentrated and largely external. PriceSmart's revenue is almost entirely in emerging-market currencies, and the 10-K describes managing this by "adjusting prices on goods acquired in U.S. dollars on a periodic basis to maintain our target margins after taking into account changes in exchange rates" and "obtaining local currency loans" (FY2025 10-K, accession 0001041803-25-000060). That mitigation is real but incomplete; a sharp currency move can still hit reported results and squeeze members' purchasing power. Expansion depends on finding and permitting good locations against local regulation, and as e-commerce and discount grocery grow in these markets, the competitive shield that has protected the clubs is not permanent. The price assumes the runway stays clear; the bear case is that it narrows.

Valuation

PriceSmart is priced as a growth retailer, and the inversion confirms the price is demanding growth, not just steadiness. At about $182 the stock is roughly 22 times company-wide operating income, which solves to operating growth near 16% a year over a five-year stage, computed at an 8.7% cost of capital with 4% terminal growth. The current operating margin is a thin 4.5%, so the value rests on volume growth and club additions rather than margin expansion. The pace is aggressive in absolute terms but within what PriceSmart has actually delivered, which is why the overall priced-in level reads as within range rather than elevated.

The family pattern is the classic split for a quality grower. The relative-multiple and growth-DCF frames support the price, while the asset-based and earnings-power frames say expensive, sitting two to three times below the quote. For a membership business, the static frames understate value because they cannot capture the recurring dues, the loyalty, and the white-space runway in underpenetrated markets, while the multiple and growth frames do. The reasonable-growth band built from the inversion runs from a low near $125 to a base around $164 and a high near $210, which places the current price modestly above the base and inside the band.

The honest framing is that the balance sheet removes financial risk while the multiple concentrates the bet on continued growth. Net cash and high interest coverage mean the company can fund expansion without strain, so the question is not solvency but whether comparable sales and club openings keep delivering. A buyer at this price is underwriting roughly mid-teens operating growth sustained for years, paying a premium to the no-growth value for a runway that is real but not guaranteed. The methods give a floor in the mid-$120s on conservative assumptions, which is the cushion if growth normalizes.

Catalysts

The recent results set a strong near-term tone. Second-quarter fiscal 2026, ended February 28, 2026, showed total revenue up 9.7% to $1.50 billion, comparable net merchandise sales up 7.6%, and net income of $49.1 million, or $1.62 per diluted share, up from $1.45 a year earlier. The first quarter was similarly solid, with revenue of $1.38 billion and comparable merchandise sales up 8.0%. Membership accounts grew 6.7% past 2 million with rising Platinum penetration. The next earnings reports are the checkpoints for whether comp momentum and membership growth hold.

The expansion pipeline is the clearest catalyst. The company has been opening new warehouse clubs across the Dominican Republic, Jamaica, and Costa Rica, operating 56 clubs across 12 countries and one US territory at the end of the recent quarter, up from 54 a year earlier, and pointing toward 61 as previously announced locations open. Each new club adds revenue and membership base, so the cadence of openings and their ramp is what the growth case watches. Continued growth in Platinum memberships and digital ordering would reinforce the recurring-revenue economics.

The risks track the consumer and the currency. Demand in Central America and the Caribbean drives comparable sales, so a regional slowdown or a drop in inflation that has been padding nominal sales would cool the top line. Foreign exchange moves can hit reported results and members' purchasing power despite the company's pricing and local-currency hedging. Finding and permitting good club locations is a gating factor for expansion, and rising e-commerce and discount competition could pressure margins over time. Analyst price targets sit below the current price, a sign the market is paying up for the growth, so any disappointment in comps or openings could weigh on the stock.

Peer Cohorts (Per Segment, With Filing Citations)

Central America (reported)

• BJ (BJ’S WHOLESALE CLUB HOLDINGS, INC.)
• FY2025 10-K: -229593) on February 11, 2019 and incorporated herein by reference). 10.2.1 Refinancing Amendment to First Lien Term Loan Credit Agreement by and among BJ's Wholesale Club, Inc., the Company, the lenders party thereto from time to time and Nomura Corporate Funding Americas, LLC, as administrative agent and collateral…
• FY2025 10-K: …as of October 12, 2023 (previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-38559) filed on October 12, 2023 and incorporated herein by reference). 10.2.5 Fifth Amendment to First Lien Term Loan Credit Agreement, by and among BJ's Wholesale Club, Inc., the Company, the lenders…
• COST (COSTCO WHOLESALE CORP /NEW)
• FY2025 10-K: …was filed; defendants' motion to dismiss this complaint was denied on May 14, 2025. In January 2023 the Company received a Civil Investigative Demand from the U.S. Attorney's Office, Western District of Washington, requesting documents. The government is conducting a False Claims Act investigation concerning whether…
• FY2025 10-K: …President, U.S. Operations. Mr. Miller was Executive Vice President, Chief Operating Officer, Southwest Division and Mexico, from January 2018 to May 2022. Mr. Miller was Senior Vice President, Western Canada Region, from 2001 to January 2018. Mr. Miller will be retiring from the Company effective February 2026. 2018…
• DLTR (DOLLAR TREE, INC.)
• FY2025 10-K: $1.25 price point to provide greater value to our customers and increase customer traffic and store productivity. We are continuing to expand our multi-price product assortment, which began with the introduction of $3 and $5 products in select discretionary categories, expanded into $3, $4 and $5 frozen and…
• FY2025 10-K: …court in California, Illinois, Louisiana, New York, Texas, and New Jersey against Dollar Tree, Family Dollar or both alleging that certain talc products that we sold caused cancer. The plaintiffs seek compensatory, punitive and exemplary damages, damages for loss of consortium, and attorneys' fees and costs. Although…
• DG (DOLLAR GENERAL CORP)
• FY2025 10-K: …General stores, and we have paused expansion of this concept while we evaluate and evolve its go-forward strategy and performance. We have also identified international expansion, with an initial focus on Mexico, as an opportunity for growth. We opened our first Mi Súper Dollar General stores in Mexico in 2023 and…
• FY2025 10-K: ,358 ​ $ 24,115 ​ $ 40,683 ​ Year ended February 3, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pre-tax ​ $ 20,502 ​ $ 26,920 ​ $ 25,249 ​ $ 72,671 ​ Net of tax ​ $ 15,893 ​ $ 20,868 ​ $ 19,573 ​ $ 56,334 ​ ​ ​ 66 Table of Contents 10. Segment reporting ​ The Company manages its business on the basis of one reportable operating…
• OLLI (Ollie’s Bargain Outlet Holdings, Inc.)
• FY2025 10-K: …is expected to be filed with the SEC not later than 120 days after the end of the fiscal year ended February 1, 2025, and is incorporated herein by reference. In addition, the Company's Board of Directors has adopted a Code of Ethical Business Conduct that applies to all of its directors, employees and officers,…
• FY2025 10-K: …the threat environment, technological trends, and information security considerations arising with respect to the Company's peers and third parties. On a quarterly basis, the Risk Committee meets to discuss ERM, including cybersecurity processes, keeping adequate records of its consideration of the applicable ERM…
• FIVE (Five Below, Inc.)
• FY2025 10-K: …brand awareness through cost-effective marketing efforts and enthusiastic customer engagement. We believe that executing on these strategies will increase the frequency of purchases by our existing customers and attract new customers to our stores. • Increase Brand Awareness. We have a cost-effective marketing…
• FY2025 10-K: 4, increased by 2.8% in fiscal 2023, and decreased by 2.0% in fiscal 2022. We expanded our store base from 1,340 stores at the end of fiscal 2022 to 1,771 stores at the end of fiscal 2024 and we plan to open approximately 150 new stores in fiscal 2025. Between fiscal 2022 and fiscal 2024, our net sales increased from…
• BURL (BURLINGTON STORES, INC.)
• FY2025 10-K: Form 8-K July 2, 2018 10.2.3 Consent and Technical Modification Agreement, dated December 3, 2018, by and between Burlington Coat Factory Warehouse Corporation, as lead borrower, and Bank of America, N.A., as administrative agent Annual Report on Form 10-K March 20, 2019 10.2.4 Consent and Technical Modification…
• FY2025 10-K: …hunt" nature of the off-price buying experience drives frequent visits to our stores. Our store base is geographically diversified with stores located in 46 states, Washington D.C. and Puerto Rico as set forth below: State Number of Stores State Number of Stores State Number of Stores AK 2 KY 9 NY 70 AL 12 LA 11 OH…
• KSS (KOHL'S CORP)
• FY2025 10-K: …$204 million, or 3.7%, to $5.3 billion in 2024. As a percentage of revenue, SG&A deleveraged by 118 basis points. The decrease in SG&A expenses was driven by strong cost discipline across the organization. In addition, as sales declined, expenses were further reduced across stores and distribution centers.…
• FY2025 10-K: February 1, 2025 three of those stores have been closed and the remaining 24 are expected to close in the first quarter of 2025. Our typical store lease has an initial term of 20-25 years and four to eight five-year renewal options. Substantially all of our leases provide for a minimum annual rent that is fixed or…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.