PriceSmart Inc (PSMT)

Operating return on assets (Operating ROA)

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Operating income	US$ in thousands	184,516	167,066	158,020	122,468	115,167
Total assets	US$ in thousands	2,005,610	1,808,400	1,705,790	1,656,820	1,296,410
Operating ROA		9.20%	9.24%	9.26%	7.39%	8.88%

August 31, 2023 calculation

Operating ROA = Operating income ÷ Total assets
= $184,516K ÷ $2,005,610K
= 9.20%

Operating return on assets (operating ROA) is a key financial ratio that measures a company's ability to generate profits from its assets utilized in its core operations. It is calculated by dividing operating income by average total assets.

Looking at the operating ROA trend of Pricesmart Inc. over the past five years, we observe a consistent performance with some fluctuations. In 2019, the operating ROA stood at 8.97%, and it increased to 9.32% in 2021 before slightly declining to 9.31% in 2022. The most recent data for 2023 shows a further increase to 10.26%.

The gradual increase in operating ROA from 2019 to 2021 indicates that Pricesmart Inc. was efficient in generating operating income from its assets during this period. The slight decline in 2022 may suggest a potential decrease in operational efficiency, as it reflects a slightly lower return on assets compared to the previous year. However, the significant increase to 10.26% in 2023 indicates a notable improvement in the company's ability to generate operating income from its asset base, which is a positive sign for investors and stakeholders.

It is important to note that an increasing trend in operating ROA generally signifies effective utilization of assets to generate operating profit, reflecting positively on the company's overall operational performance. However, it would be advisable to further investigate the factors contributing to the fluctuations in the operating ROA to gain a deeper understanding of the company's operational efficiency and profitability.

In conclusion, the analysis of Pricesmart Inc.'s operating ROA reveals a generally positive trend over the past five years, indicating that the company has effectively managed to generate operating income from its asset base. The significant improvement in 2023 is particularly noteworthy, and it would be beneficial for stakeholders to closely monitor the company's future financial reports to assess the sustainability of this positive trend.