Intrinsic value of PriceSmart, Inc. - PSMT

Previous Close

$62.61

  Intrinsic Value

$33.93

stock screener

  Rating & Target

sell

-46%

Previous close

$62.61

 
Intrinsic value

$33.93

 
Up/down potential

-46%

 
Rating

sell

We calculate the intrinsic value of PSMT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,230
  3,305
  3,390
  3,485
  3,591
  3,706
  3,833
  3,969
  4,117
  4,275
  4,444
  4,624
  4,816
  5,020
  5,237
  5,466
  5,709
  5,966
  6,237
  6,524
  6,826
  7,145
  7,481
  7,835
  8,208
  8,601
  9,015
  9,450
  9,907
  10,389
Variable operating expenses, $m
  3,085
  3,156
  3,237
  3,327
  3,428
  3,539
  3,659
  3,789
  3,929
  4,080
  4,235
  4,407
  4,590
  4,784
  4,991
  5,210
  5,441
  5,686
  5,945
  6,218
  6,506
  6,810
  7,130
  7,468
  7,823
  8,198
  8,592
  9,006
  9,442
  9,901
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  3,085
  3,156
  3,237
  3,327
  3,428
  3,539
  3,659
  3,789
  3,929
  4,080
  4,235
  4,407
  4,590
  4,784
  4,991
  5,210
  5,441
  5,686
  5,945
  6,218
  6,506
  6,810
  7,130
  7,468
  7,823
  8,198
  8,592
  9,006
  9,442
  9,901
Operating income, $m
  145
  149
  153
  157
  162
  168
  174
  180
  187
  194
  209
  217
  226
  236
  246
  256
  268
  280
  293
  306
  320
  335
  351
  368
  385
  404
  423
  443
  465
  487
EBITDA, $m
  203
  208
  213
  219
  226
  233
  241
  250
  259
  269
  279
  291
  303
  316
  329
  344
  359
  375
  392
  410
  429
  449
  471
  493
  516
  541
  567
  594
  623
  653
Interest expense (income), $m
  6
  6
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  22
  24
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  55
  58
Earnings before tax, $m
  140
  143
  146
  150
  154
  159
  164
  169
  175
  182
  194
  201
  209
  217
  226
  235
  244
  255
  265
  277
  289
  301
  314
  328
  343
  359
  375
  392
  410
  429
Tax expense, $m
  38
  39
  40
  41
  42
  43
  44
  46
  47
  49
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
Net income, $m
  102
  104
  107
  110
  113
  116
  120
  124
  128
  133
  142
  147
  153
  159
  165
  171
  178
  186
  194
  202
  211
  220
  230
  240
  250
  262
  274
  286
  299
  313

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,241
  1,269
  1,302
  1,338
  1,379
  1,423
  1,472
  1,524
  1,581
  1,642
  1,706
  1,776
  1,849
  1,928
  2,011
  2,099
  2,192
  2,291
  2,395
  2,505
  2,621
  2,744
  2,873
  3,009
  3,152
  3,303
  3,462
  3,629
  3,805
  3,989
Adjusted assets (=assets-cash), $m
  1,241
  1,269
  1,302
  1,338
  1,379
  1,423
  1,472
  1,524
  1,581
  1,642
  1,706
  1,776
  1,849
  1,928
  2,011
  2,099
  2,192
  2,291
  2,395
  2,505
  2,621
  2,744
  2,873
  3,009
  3,152
  3,303
  3,462
  3,629
  3,805
  3,989
Revenue / Adjusted assets
  2.603
  2.604
  2.604
  2.605
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.605
  2.604
  2.605
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
  2.604
Average production assets, $m
  614
  628
  644
  662
  682
  704
  728
  754
  782
  812
  844
  879
  915
  954
  995
  1,039
  1,085
  1,134
  1,185
  1,240
  1,297
  1,358
  1,421
  1,489
  1,560
  1,634
  1,713
  1,795
  1,882
  1,974
Working capital, $m
  29
  30
  31
  31
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  71
  74
  77
  81
  85
  89
  93
Total debt, $m
  112
  123
  135
  149
  164
  181
  199
  219
  240
  263
  288
  314
  341
  371
  402
  436
  471
  508
  547
  589
  632
  679
  727
  779
  833
  889
  949
  1,012
  1,079
  1,148
Total liabilities, $m
  468
  478
  491
  505
  520
  537
  555
  575
  596
  619
  643
  669
  697
  727
  758
  791
  827
  864
  903
  945
  988
  1,034
  1,083
  1,134
  1,188
  1,245
  1,305
  1,368
  1,434
  1,504
Total equity, $m
  773
  791
  811
  834
  859
  887
  917
  950
  985
  1,023
  1,063
  1,106
  1,152
  1,201
  1,253
  1,308
  1,366
  1,427
  1,492
  1,561
  1,633
  1,709
  1,790
  1,875
  1,964
  2,058
  2,157
  2,261
  2,370
  2,485
Total liabilities and equity, $m
  1,241
  1,269
  1,302
  1,339
  1,379
  1,424
  1,472
  1,525
  1,581
  1,642
  1,706
  1,775
  1,849
  1,928
  2,011
  2,099
  2,193
  2,291
  2,395
  2,506
  2,621
  2,743
  2,873
  3,009
  3,152
  3,303
  3,462
  3,629
  3,804
  3,989
Debt-to-equity ratio
  0.140
  0.160
  0.170
  0.180
  0.190
  0.200
  0.220
  0.230
  0.240
  0.260
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.420
  0.430
  0.440
  0.450
  0.460
  0.460
Adjusted equity ratio
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  102
  104
  107
  110
  113
  116
  120
  124
  128
  133
  142
  147
  153
  159
  165
  171
  178
  186
  194
  202
  211
  220
  230
  240
  250
  262
  274
  286
  299
  313
Depreciation, amort., depletion, $m
  58
  59
  60
  62
  63
  65
  67
  69
  72
  74
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
Funds from operations, $m
  160
  163
  167
  171
  176
  181
  187
  193
  200
  207
  213
  221
  230
  239
  248
  259
  270
  281
  293
  306
  320
  334
  349
  365
  382
  399
  418
  437
  458
  479
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Cash from operations, $m
  159
  163
  166
  170
  175
  180
  186
  192
  198
  205
  211
  219
  228
  237
  246
  257
  267
  279
  291
  303
  317
  331
  346
  362
  378
  396
  414
  433
  454
  475
Maintenance CAPEX, $m
  -50
  -52
  -53
  -54
  -56
  -57
  -59
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -100
  -104
  -109
  -114
  -119
  -125
  -131
  -137
  -144
  -151
  -158
New CAPEX, $m
  -13
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -54
  -57
  -61
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -91
Cash from investing activities, $m
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -116
  -121
  -128
  -133
  -140
  -147
  -154
  -161
  -170
  -178
  -186
  -196
  -206
  -216
  -227
  -238
  -249
Free cash flow, $m
  95
  97
  97
  98
  99
  101
  103
  105
  107
  110
  111
  114
  117
  121
  125
  129
  134
  139
  144
  149
  155
  161
  168
  175
  182
  190
  198
  207
  216
  225
Issuance/(repayment) of debt, $m
  9
  11
  12
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  9
  11
  12
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
Total cash flow (excl. dividends), $m
  105
  108
  110
  112
  115
  118
  121
  125
  128
  133
  135
  140
  145
  151
  156
  163
  169
  176
  183
  191
  199
  208
  217
  226
  236
  247
  258
  270
  282
  295
Retained Cash Flow (-), $m
  -15
  -18
  -20
  -23
  -25
  -28
  -30
  -33
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -69
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -109
  -115
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  90
  90
  89
  89
  89
  90
  91
  92
  93
  95
  95
  97
  99
  102
  105
  108
  111
  115
  118
  122
  127
  131
  136
  141
  147
  153
  159
  166
  172
  180
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  86
  82
  78
  73
  69
  65
  61
  57
  54
  50
  45
  41
  38
  34
  31
  27
  24
  21
  18
  16
  13
  11
  9
  7
  6
  4
  3
  3
  2
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

PriceSmart, Inc., through its subsidiaries, is engaged in the international operation of membership shopping in warehouse clubs. In addition, the Company operates distribution centers and offices in the United States. The Company's segments include the United States, Central America, the Caribbean and Colombia. The Company owns and operates the United States-style membership shopping warehouse clubs in Latin America and the Caribbean. It offers private label consumer goods to individuals and businesses. The Company offers three types of memberships, such as Business, Diamond and in Costa Rica Platinum memberships. It promotes Business membership through its marketing programs and offers certain merchandise targeted to businesses, such as restaurants, hotels, convenience stores, offices and institutions. The Diamond membership is focused on individuals and families. The Company offers Platinum memberships in Costa Rica.

FINANCIAL RATIOS  of  PriceSmart, Inc. (PSMT)

Valuation Ratios
P/E Ratio 20.9
Price to Sales 0.6
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 15.5
Price to Free Cash Flow -158.6
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 73.1%
Cap. Spend. - 3 Yr. Gr. Rate 2.7%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 12.4%
Total Debt to Equity 15%
Interest Coverage 23
Management Effectiveness
Return On Assets 8.4%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 11.7%
Ret/ On T. Cap. - 3 Yr. Avg. 12.7%
Return On Equity 13.5%
Return On Equity - 3 Yr. Avg. 14.7%
Asset Turnover 2.6
Profitability Ratios
Gross Margin 15.9%
Gross Margin - 3 Yr. Avg. 15.9%
EBITDA Margin 6.2%
EBITDA Margin - 3 Yr. Avg. 6.2%
Operating Margin 4.6%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 4.4%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 33.1%
Payout Ratio 23.1%

PSMT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PSMT stock intrinsic value calculation we used $3167 million for the last fiscal year's total revenue generated by PriceSmart, Inc.. The default revenue input number comes from 0001 income statement of PriceSmart, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PSMT stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PSMT is calculated based on our internal credit rating of PriceSmart, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of PriceSmart, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PSMT stock the variable cost ratio is equal to 95.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PSMT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for PriceSmart, Inc..

Corporate tax rate of 27% is the nominal tax rate for PriceSmart, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PSMT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PSMT are equal to 19%.

Life of production assets of 11.9 years is the average useful life of capital assets used in PriceSmart, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PSMT is equal to 0.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $758.002 million for PriceSmart, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 30.478 million for PriceSmart, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of PriceSmart, Inc. at the current share price and the inputted number of shares is $1.9 billion.

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