PriceSmart Inc (PSMT)
Profitability ratios
Return on sales
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 87.11% | 87.38% | 86.55% | 3.67% | 3.62% |
| Operating profit margin | 4.21% | 4.11% | 4.37% | 3.68% | 3.57% |
| Pretax margin | 3.86% | 3.85% | 4.06% | 3.48% | 3.44% |
| Net profit margin | 2.49% | 2.57% | 2.71% | 2.35% | 2.27% |
Based on the provided data, let's analyze the profitability ratios of Pricesmart Inc. over the past five years.
1. Gross Profit Margin:
Pricesmart Inc.'s gross profit margin has generally been stable, with a slight fluctuation over the years. In 2023, the gross profit margin was 17.21%, which is a slight improvement from the previous year. This indicates that the company is effectively managing its cost of goods sold and generating more profit from its sales.
2. Operating Profit Margin:
The operating profit margin measures the company's profitability from its core business operations. Pricesmart Inc.'s operating profit margin has shown a consistent upward trend, reaching 4.67% in 2023. This indicates that the company is becoming more efficient in managing its operating expenses and is generating more profit from its day-to-day operations.
3. Pretax Margin:
The pretax margin measures the company's profitability before accounting for taxes. Pricesmart Inc.'s pretax margin has fluctuated slightly over the years, with a marginal decrease in 2023 to 3.83%. This suggests that while the company has been able to improve its operating efficiency, its profitability before taxes has faced some challenges, which may be attributed to changes in tax rates or non-operating expenses.
4. Net Profit Margin:
The net profit margin measures the company's overall profitability after accounting for all expenses, including taxes and interest. Pricesmart Inc.'s net profit margin has remained relatively stable, with a slight decrease to 2.48% in 2023. This indicates that the company is able to convert a smaller portion of its revenue into net profit, potentially due to increased non-operating expenses or a higher tax burden.
In summary, Pricesmart Inc. has shown improvements in its gross profit margin and operating profit margin, indicating better cost management and operational efficiency. However, its pretax margin and net profit margin have shown more volatility and moderate declines in 2023, suggesting potential challenges in controlling non-operating expenses and taxes. Further analysis of the company's financial and non-financial factors is recommended to understand the underlying reasons for these changes and to assess the company's overall profitability and sustainability.
Return on investment
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 9.20% | 9.24% | 9.26% | 7.39% | 8.88% |
| Return on assets (ROA) | 5.44% | 5.78% | 5.74% | 4.71% | 5.65% |
| Return on total capital | 14.69% | 15.17% | 15.03% | 13.08% | 13.32% |
| Return on equity (ROE) | 9.86% | 10.55% | 10.70% | 9.39% | 9.18% |
Profitability ratios provide insights into a company's ability to generate profits relative to its assets and capital. Let's analyze Pricesmart Inc.'s profitability ratios based on the provided data.
1. Operating Return on Assets (Operating ROA): This ratio measures the operating income generated per dollar of assets. Pricesmart's operating ROA has shown an increasing trend over the past five years, reaching 10.26% in 2023, indicating an improvement in the company's operating efficiency and profitability.
2. Return on Assets (ROA): ROA evaluates the overall effectiveness of a company in utilizing its assets to generate profit. Despite a slight fluctuation, Pricesmart's ROA has remained relatively stable, with a slight decrease from 5.71% in 2022 to 5.44% in 2023. This suggests that the company's profitability in relation to its total assets has slightly declined in the most recent year.
3. Return on Total Capital: This ratio reflects the return earned on the total invested capital, including debt and equity. Pricesmart's return on total capital has shown a consistent upward trend, reaching 16.39% in 2023. This indicates that the company has effectively increased its profitability relative to the total capital employed, reflecting efficient use of both debt and equity funding.
4. Return on Equity (ROE): ROE measures the return earned for each dollar of shareholders' equity. Pricesmart's ROE has exhibited fluctuations over the past five years, showing a slight decrease to 9.86% in 2023. Although the ROE has fluctuated, it remains within a relatively stable range, indicating the company's ability to generate profitability from shareholders' equity.
In conclusion, Pricesmart Inc. has generally demonstrated an improvement in its operating efficiency and return on total capital. However, the slight decrease in ROA and ROE in 2023 suggests a need for further analysis to understand the factors driving the changes in profitability. Overall, the company's profitability ratios indicate a relatively stable and efficient performance over the past five years, albeit with some fluctuations in specific ratios.