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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in PriceSmart (NASDAQ:PSMT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide PriceSmart with the means to add long-term value to shareholders.
PriceSmart's Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. PriceSmart managed to grow EPS by 12% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note PriceSmart achieved similar EBIT margins to last year, revenue grew by a solid 8.7% to US$5.1b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
View our latest analysis for PriceSmart
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for PriceSmart.
Are PriceSmart Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own PriceSmart shares worth a considerable sum. We note that their impressive stake in the company is worth US$230m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!