PriceSmart, Inc. (PSMT): what the price requires
At today's price, PriceSmart, Inc. (PSMT) is priced for +17.7% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/PSMT
Headline
| Field | Value |
|---|---|
| Ticker | PSMT |
| Company | PriceSmart, Inc. |
| Current price | $190.98/sh |
| Composition | United States Operations 0% / Central American Operations 61% / Caribbean Operations 27% / Colombia Operations 12% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 2.0% |
| Operating margin today | 4.7% |
| Margin compression implied | -2.7pp |
| Implied growth | 17.7% |
| Multiple paid | 23x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 8.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.5pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.77σ |
| cohort percentile (of 69 peers) | 70 |
| sustained it ~5 years at this level | 41% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.06x | 5 | expensive |
| Earnings | 3.65x | 5 | expensive |
| Relative | 1.27x | 5 | expensive |
| Growth | 1.21x | 3 | expensive |
Families that justify the price: 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 8.8%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $63.84 | 2.99x | yes | FCF base $0.1B, growth 9% (input: historical growth), terminal g 4.0%, WACC 8.8%, 6yr projection |
| DCF Exit Multiple | Growth | $172.14 | 1.11x | yes | Exit EV/EBITDA: 15.5x / 17.5x / 19.5x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $150.26 | 1.27x | yes | P/E 26.51x (blended: static sector reference 22x + trailing (TTM) 37x), scenarios: 22.1x / 26.5x / 30.9x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $55.75 | 3.43x | yes | BV/sh $44.07, ROE (TTM) 11.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $62.37 | 3.06x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $157.69 | 1.21x | yes | Rev $5.5B, growth 9% (input: historical growth; tapered), Terminal P/S: 0.9x / 1.0x / 1.2x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $60.84 | 3.14x | yes | EPS $5.07, growth 8% (input: historical EPS growth), PEG=4.57 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $52.39 | 3.65x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.20B × (1−21%) / WACC 8.8% → EPV (no growth) |
| Residual Income | Asset | $63.69 | 3.00x | yes | BV $44.07 + 5yr PV of (ROE (TTM) 11.7% − Kₑ 9.3%) × BV; BV grows 7.6%/yr |
| Graham Number | Asset | $70.91 | 2.69x | yes | √(22.5 × EPS $5.07 × BVPS $44.07) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $151.81 | 1.26x | yes | EBITDA $0.34B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $24.14 | 7.91x | yes | FCF $84.5M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $16.86 | 11.33x | yes | SBC-adj FCF $0.06B (FCF $0.08B − SBC $0.02B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $104.96 | 1.82x | yes | EPS $5.07 × (8.5 + 2×8.1%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $19.70 | 9.69x | yes | BV $44.07 × (ROIC 3.9% / WACC 8.8%) |
| P/Sales Sector | Relative | $365.45 | 0.52x | yes | Revenue $5.53B × sector P/S 2.0x |
| PEG Fair Value | Relative | $61.60 | 3.10x | yes | EPS $5.07 × (PEG 1.5 × growth 8.1% (input: historical EPS growth)) → PE 12.2x |
| Earnings Yield | Earnings | $54.81 | 3.48x | yes | EPS $5.07 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $138.8m |
| Net debt / NOPAT (after-tax) | -0.68x (net cash) |
| Net debt / operating income (pre-tax) | -0.53x (net cash) |
| Interest coverage | 19.0x |
| Share count CAGR (buyback) | -0.3% |
| Burning cash | no |
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.)
- (no filing in the citation store)
- COST (COSTCO WHOLESALE CORP /NEW)
- (no filing in the citation store)
- DLTR (DOLLAR TREE, INC.)
- (no filing in the citation store)
- DG (DOLLAR GENERAL CORP)
- (no filing in the citation store)
- OLLI (Ollie’s Bargain Outlet Holdings, Inc.)
- (no filing in the citation store)
- FIVE (Five Below, Inc.)
- (no filing in the citation store)
- BURL (BURLINGTON STORES, INC.)
- (no filing in the citation store)
- KSS (KOHL'S CORP)
- (no filing in the citation store)
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.