Pricesmart Stock Story

PSMT
 Stock
  

USD 65.83  2.18  3.42%   

Given the investment horizon of 90 days Pricesmart is expected to under-perform the market. In addition to that, the company is 1.22 times more volatile than its market benchmark. It trades about -0.11 of its total potential returns per unit of risk. The DOW is currently generating roughly -0.09 per unit of volatility. As many adventurous traders are excited about consumer defensive space, it is only fair to review the risk of shorting Pricesmart based on its current volatility spike. We will cover the possibilities of Pricesmart's current volatility to continue through August.
Published over a month ago
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Should you trade more of Pricesmart (NASDAQ:PSMT) based on newest volatility?

Pricesmart currently holds roughly 207.2 M in cash with 89.52 M of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 6.79.
Volatility is a rate at which the price of Pricesmart or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Pricesmart may increase or decrease. In other words, similar to Pricesmart's beta indicator, it measures the risk of Pricesmart and helps estimate the fluctuations that may happen in a short period of time. So if prices of Pricesmart fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility.
Please read more on our technical analysis page.

How important is Pricesmart's Liquidity

Pricesmart financial leverage refers to using borrowed capital as a funding source to finance Pricesmart ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Pricesmart financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between Pricesmart's total debt and its cash.

How does Pricesmart utilize its cash?

To perform a cash flow analysis of Pricesmart, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash Pricesmart is receiving and how much cash it distributes out in a given period. The Pricesmart cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.
Pricesmart Net Cash Flow from Operations is comparatively stable at the moment as compared to the past year. Pricesmart reported Net Cash Flow from Operations of 114.45 Million in 2021

Pricesmart Volatility Drivers

Pricesmart unsystematic risk is unique to Pricesmart and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Pricesmart you can also buy Walgreens Boots Alliance. You can also mitigate this risk by investing in the discount stores sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Pricesmart important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Pricesmart income statement and balance sheet. Here are more details about Pricesmart volatility.
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