During its latest quarter, warehouse club PriceSmart  wasn't able to grow its earnings as it has done before. But its recent January results portray a brighter picture once again. Does this make the company a valuable buy? Let's look at the company and analyze it alongside Costco Wholesale  and Sam's Club, Wal-Mart Stores'  warehouse segment.

What's cooking at PriceSmart?
In the first quarter, PriceSmart's earnings per share grew to $0.71 from $0.66 in the same quarter last year. But earnings missed the Zacks consensus estimate of $0.74 per share. Compared to previous quarters, this period saw relatively slow growth in sales and margins, which pressured the company's earnings.

Comparable-store sales grew by a healthy 7.9%, but this growth rate was much slower than anticipated. Analysts had grown accustomed to same-store sales growth of more than 9%, which the company had consistently delivered in the past. Total revenue stood at $605.6 million, increasing more than 13% from last year's revenue of $535.3 million. Net warehouse club sales jumped by 12.5%, largely attributable to Latin America and the Caribbean, which witnessed sales growth of 14.2% and 9%, respectively. Apart from the Caribbean, Trinidad and Aruba also contributed to the results.


During the quarter, the company's membership increased by 12% to a total of 1,120 million members. Additionally, the company was able to retain 85% of its members. Revenue earned from memberships rose 20.8% to $9.2 million.

PriceSmart's January results show that the company's net sales increased 11.5% to $193.5 million. For the five months ended Jan. 31, net sales jumped by 11.9%. Same-store sales for the month grew 8.4% in comparison to the year-ago quarter, proving once again that the company is continuously expanding its market share.

PriceSmart still has its eyes set on the lucrative Central American market. During the quarter, the company opened its sixth warehouse in Costa Rica and made significant progress in constructing its second warehouse in Southern Tegucigalpa, Honduras, which is expected to start operations by May. PriceSmart also purchased land in Pereira, Colombia where it has plans of opening a store by late 2014.  

According to consensus estimates, PriceSmart is expected to earn $3.16 during its fiscal year 2014. On the sales front, analysts' expectations stand at approximately $2.6 billion.

Fundamentals
PriceSmart's high price-to-earnings ratio shows that the company is much more expensive than its rivals Costco and Wal-Mart. But again, this high price is justified to some extent, as PriceSmart's stock has given a year-over-year return of 22%. It has also seen sales growth of more than 13%, which is far better than its competitors. However, PriceSmart is still somewhat expensive at this moment.

Competitors
The warehouse club Costco offers a large range of merchandise at heavy discounts in order to cater to budget-conscious customers perturbed by the economy. The company holds a sizable market share, with more than 650 warehouses worldwide.

In the fiscal first quarter, Costco's sales increased by 5% to about $24.5 billion, missing Reuters' expectations of $25.3 billion. Earnings per share grew to $0.96 from $0.95 in the year-ago quarter, falling short of the $1.02 Reuters estimate. Weak earnings were due to an increase in operating costs and selling, general, and administrative expenses, which increased by 5.5% and 7.2%, respectively. However, the company is still in-line with its long-term goals, as its memberships are still growing thanks to huge discounts offered by its stores.

Wal-Mart's Sam's Club is struggling these days amid global economic headwinds. In the most recent quarter, Sam's Club contributed $14.1 billion in sales to Wal-Mart. Comparable-store sales for the warehouse chain grew by 1.1%; the Reuters estimate was for a 1.3% increase. In addition to high operating costs, severe weather conditions in the US also affected income during the quarter.

Wal-Mart is laying-off about 2,300 employees at Sam's Club to curb its operating costs. Furthermore, Wal-Mart has also lowered its full-year same-store sales guidance (excluding fuel) for the warehouse to 2%.

Final thoughts
PriceSmart's latest quarterly earnings couldn't keep up the momentum, as it missed analysts' expectations by a small margin. However, its robust sales suggest that the company is still capturing more market share. A healthy number of new members signed up and there was a solid membership renewal rate.

Same-stores sales for the month of January jumped once again, showing that the company still has a strong foothold in the retail market. PriceSmart is quite effectively growing across the Central American region with new store openings, which signals that the company is confident about its future prospects.

All in all, PriceSmart still seems to be heading in the right direction, but it is slightly overpriced at this stage. Therefore, I believe this isn't the ideal time to buy the stock.

Are there any ideal retail investments out there?
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

 

The article Is PriceSmart Still a Smart Buy? originally appeared on Fool.com.

Zahid Waheed has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale and PriceSmart. The Motley Fool owns shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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