PriceSmart (PSMT): Q3 2026 results, my verdict

2026-07-08 · By Lubin Danilo, founder of Lubin Investment

PSMT: see the full analysis on Lubin Investment

PriceSmart reported revenue up 12.5% and continues expanding across Latin America. Impressive growth on paper, but my quality grid shows a company struggling to turn that growth into real profitability, at a price that leaves no room for error.

Key takeaways

• Third-quarter fiscal 2026 revenue up 12.5% to $1.48 billion.
• Net income of $39.7 million, with EPS of $1.28 versus $1.14 a year earlier.
• The company keeps expanding: new clubs in the Dominican Republic and Costa Rica, first club planned in Chile.
• My quality grid only validates 5 out of 10 criteria: profitability and capital returns remain weak.
• The stock trades at 89 times free cash flow, far above the fair buy price under my model.

What was just reported

PriceSmart runs Costco-style warehouse clubs across Central America and the Caribbean. For its third quarter of fiscal 2026, revenue climbed 12.5% to $1.48 billion, driven by comparable sales up 10.7%. Net income reached $39.7 million, with EPS of $1.28 versus $1.14 a year earlier. The company keeps expanding: it now runs 57 clubs across 12 countries and one U.S. territory, with an eleventh club in Costa Rica, a sixth in the Dominican Republic, and a first club announced in Chile.

On paper, a solid growth story in an emerging region where PriceSmart has few direct competitors in its format.

What my quality grid says

This is where the picture gets more nuanced. PriceSmart only validates 5 of my 10 criteria. Its net margin caps out at 2.8%, typical for discount retail but leaving very little cushion in hard times. Earnings per share have actually declined 7.4% a year on average over five years, despite sales growth: new stores are costly to open and take time to become profitable. Return on invested capital is weak at 4.6% a year, well below my 15% threshold. And only 41% of accounting profit turns into real available cash, a number that shows how much expansion (new clubs, inventory, real estate) absorbs cash before returning anything.

The bright spot: margins are expanding over the period, and debt remains very well controlled (repayable with barely 0.17 year of free cash flow).

The price: no room for error

This is where the story really gets tricky. PriceSmart trades at 89 times its free cash flow, the highest multiple in the entire discount retail sector I cover. My valuation model puts the fair buy price around $49, versus a current price of $189. The market isn't paying for PriceSmart's growth, it's paying a very generous promise of growth for years to come.

My verdict

12.5% revenue growth is a genuine operational win, and the Chile expansion opens a new avenue. But sales growth isn't the same as value creation: capital returns are weak, earnings per share have declined over five years, and the current price leaves absolutely no room for disappointment. This is exactly the kind of situation where I separate my two questions: a good growth story, but not a quality stock under my grid, at this price.

FAQ

Did PriceSmart grow this quarter?

Yes, revenue climbed 12.5% to $1.48 billion and EPS rose from $1.14 to $1.28 year over year.

Is PriceSmart a quality stock under your method?

It only validates 5 of my 10 criteria. Its profitability, capital returns, and cash conversion remain weak despite solid sales growth.

Is PriceSmart expensive on the stock market?

Very. It trades at 89 times free cash flow, the highest multiple in its sector, well above my model's fair buy price of around $49.

Which countries is PriceSmart expanding into?

The company just opened new clubs in the Dominican Republic and Costa Rica, and announced its first club in Chile.

PSMT: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).