Wal-Mart Stores, Inc. (WMT), PriceSmart, Inc. (PSMT): 4 Reasons Why This Retailer Will Outperform

Outlook

PriceSmart, Inc. (NASDAQ:PSMT) plans to expand its presence in Costa Rica. It is in the process of procuring permits for 6 more stores in the region. PriceSmart plans to open another store in Colombia by the end of 2013.

The Latin American economy shows no signs of easing up especially with an expansion project of the Panama Canal due for completion in 2014. This should also continue to fuel PriceSmart’s rally.

The price to earnings ratio of PriceSmart indicates the stock market’s full awareness of the company’s fundamental performance making this company a little more expensive (see table below).

Source: Yahoo! Finance

Conclusion

This company largely operates in a vibrant economy fueled by an expanding infrastructure, specifically the Panama Canal, which will translate into superior growth for the company’s fundamentals and rewards for its shareholders. In addition, its small size and lack of major competition will also serve as a catalyst for future growth. PriceSmart represents a pure emerging markets play with some underlying political risk and market price risk as evidenced by the high P/E ratio. However, if the past five years serve as an indication, shareholders will be compensated for the extra risk. I made a five year outperform pick on the Motley Fool Caps game.

The article 4 Reasons Why This Retailer Will Outperform originally appeared on Fool.com and is written by William Bias.

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