PriceSmart Inc (PSMT)

Return on assets (ROA)

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Net income	US$ in thousands	109,205	104,534	97,963	78,109	73,191
Total assets	US$ in thousands	2,005,610	1,808,400	1,705,790	1,656,820	1,296,410
ROA		5.44%	5.78%	5.74%	4.71%	5.65%

August 31, 2023 calculation

ROA = Net income ÷ Total assets
= $109,205K ÷ $2,005,610K
= 5.44%

The return on assets (ROA) measures a company's efficiency in using its assets to generate profit. It is calculated by dividing the net income by the average total assets. Here's a comprehensive analysis of Pricesmart Inc.'s ROA based on the provided data:

1. Trend Analysis:
- Pricesmart Inc.'s ROA has fluctuated over the past five years, ranging from 4.66% in 2020 to 5.71% in 2022. The slight variation in ROA indicates some inconsistency in the company's ability to generate profits from its assets.

2. Comparison to Industry and Peers:
- To understand the context of Pricesmart Inc.'s ROA, it's essential to compare it with industry averages and its competitors' ROA. A higher ROA than the industry average suggests better asset utilization, while a lower ROA may indicate less efficiency.

3. Drivers of Change:
- The changes in ROA could be attributed to shifts in the company's net income and/or the average total assets. Analyzing what factors have influenced these changes can provide valuable insights into the company's performance and strategy.

4. Impact of Economic Conditions:
- External economic factors may also have influenced Pricesmart Inc.'s ROA. For instance, changes in consumer spending patterns, inflation, or interest rates can impact the company's profitability and asset utilization.

5. ROA Stability:
- While there has been some fluctuation in Pricesmart Inc.'s ROA, it has generally remained within a relatively narrow range. This indicates a degree of stability in the company's ability to generate returns from its assets.

6. Efficiency and Profitability:
- A higher ROA signifies better efficiency and profitability in utilizing the company's assets to generate earnings. Therefore, maintaining a reasonable and consistent ROA is crucial for sustainable business growth.

In conclusion, Pricesmart Inc.'s ROA has shown variability over the past five years, indicating fluctuations in the company's ability to generate profits from its assets. Further analysis of the underlying factors driving these changes, along with benchmarking against industry peers, would provide a more comprehensive understanding of the company's performance.