PriceSmart (PSMT): Flat YoY EPS Growth Expected, Waiting For Bullish Price Action

No rest for the weary. Earnings season is here! Walgreens reported results last week and a few more trickle in before Friday morning’s big bank reports.

One small Consumer Staples stock flies under the radar, but the stock might be on the move following its Monday evening report. Are shares of PriceSmart a buy here or should you just window-shop? Let’s check it out.

Wall Street Horizon’s Earnings Calendar and Cadence

According to CFRA Research, PriceSmart (NASDAQ:PSMT) owns and operates U.S.-style membership shopping warehouse clubs in the United States, Central America, the Caribbean, and Colombia. Its warehouse clubs sell locally and regionally sourced goods, essential goods, direct-from-farm fresh produce, private label consumer products, prepared foods, and fresh-baked goods under the brand name Memberâs Selection.

The California-based $1.9 billion market cap Food & Staples Retailing industry company in the Consumer Staples sector trades at a near-market trailing 12-month GAAP price-to-earnings ratio of 18.6 and pays a small 1.4% dividend yield, according to The Wall Street Journal.

PriceSmart beat on earnings back in October while reporting in-line revenue numbers. Shares were already on the mend following a low earlier in the month after that news. Impressively, total membership grew to a record level as sales rose a robust 12.1% year-on-year. What took PSMT lower more recently was news that CEO Sherry Bahrambeygui will step down effective February 3. The stock dropped further to close out 2022 despite some strength in the Consumer Staples sector. In all, PSMT is down more than 13% in the last 52 weeks versus a 0.5% total return gain in XLP.

On valuation, PSMT trades at 16.5 times 2023 operating earnings using the $3.79 CFRA research consensus estimate. Per-share profits are then seen as rising at a solid rate in 2024 to $4.11. Sales growth is expected in its upcoming Q1 report and a multi-year revenue CAGR near 10% is attractive in a volatile macro environment.

As a food retailer, it’s important to pay attention to margins, and a 4.1% operating margin is a smidgen above the peer average, which is good to see. Overall, I see the stock as fairly valued here but growth looks good.

PriceSmart: Earnings Outlook and Key Profitability Ratios

Looking ahead, corporate event data provided by Wall Street Horizon show a confirmed Q1 2023 earnings date of Monday, January 9 AMC. On Tuesday at noon ET, the management team hosts its quarterly conference call, and you can listen live here. The volatility catalysts do not end there, though. PSMT hosts a shareholder meeting on Friday, February 3.

Corporate Event Calendar

The Options Angle

Digging into the upcoming earnings report, data from Option Research & Technology Services (ORATS) show a consensus EPS forecast of $0.97 which would be about unchanged from $0.98 of per-share profits earned in the same quarter a year ago.

The company has a mixed earnings beat rate history and shares generally range from –10% to +10% in the wake of each quarterly report. Without liquid options, it is hard to gauge an expected post-earnings stock price swing with this discount store stock.

PSMT: Flat EPS Growth Seen

The Technical Take

PSMT’s chart should not be over-analyzed. My main indicator here is a declining 200-day moving average on the below 3-year zoom. That tells me the trend is firmly lower despite a pair of big bear market rallies in the last year.

What’s bullish, though, is that the stock has retreated from a high of near $105 to around $60 – which is the bottom zone of a significant volume-by-price range. Perhaps the stock finds natural buyers here, but with shares mired in a 2-year downtrend, I would really like to see PSMT climb above the November peak on strong volume along with a turn-up in the 200dma.

PSMT: A Protracted Downtrend

The Bottom Line

PSMT’s valuation is fair, so the technicals are the final arbiter. With a downtrending stock, I’m a hold for now but would turn more bullish if the stock can show signs of stabilization. Perhaps the upcoming earnings report will be that catalyst.