PriceSmart, Inc. (PSMT): Should You Buy Latin America’s Costco Wholesale Corporation (COST)?

In the recently reported quarter, its loss per diluted share worked out to $1.83, as compared to $1.25 in the year-ago quarter. Considering the lack of any visible strategy for a turnaround, a high beta of 2.79, and change in consumer tastes with proliferation of e-commerce websites, it would not be wrong to say that investing in this retailer could be the worst investment to make in retail right now.

On the other hand, Costco Wholesale Corporation (NASDAQ:COST) currently operates 627 warehouses, with 449 of them in the U.S and the rest in Canada, Mexico, Australia, U.K., Japan, etc. In the last reported quarter, it logged net sales that were 8% higher than the year ago quarter at $23.55 billion. It operates as a ‘member only’ store with three levels of memberships, and consumers don’t mind paying that if performance of the company is the parameter to judge on.

Costco Wholesale Corporation (NASDAQ:COST) has plans to open up 9 new stores before the end of fiscal 2013 in September, and it also operates several e-commerce web sites. Costco’s growth story is based on new memberships and being able to retain members. An aggressive expansion plan is reflected in the fact that Costco Wholesale Corporation (NASDAQ:COST) is looking to expand its square footage by 4.5% this year, while it had grown its square footage by 3% last year.

Over the last decade, Costco Wholesale Corporation (NASDAQ:COST) has performed well by and large, with the exception of the recession hiccups from late 2008 through 2010. It is also a pretty defensive stock to have in your portfolio, with beta of 0.49.

Conclusion

While Costco Wholesale Corporation (NASDAQ:COST) has been on a roll in the U.S., PriceSmart is having some difficulty in keeping up with estimates due to competitive pricing. But from an investment point of view, Costco Wholesale Corporation (NASDAQ:COST) looks better as it is cheaper at 24x trailing P/E, and also provides a higher dividend yield at 1.10%. In comparison, PriceSmart trades at a more expensive 32x P/E and yields 0.70%. However, more aggresive investors can go for PriceSmart since the company is growing at a faster pace and should benefit from a growing middle class in Latin America.

The article Should You Buy Latin America’s Costco? originally appeared on Fool.com and is written by ANUP SINGH.

ANUP SINGH has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale (NASDAQ:COST) and PriceSmart. The Motley Fool owns shares of Costco Wholesale.

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