PRICESMART INC (PSMT) stock intrinsic value fair value estimate & owner earnings analysis

PriceSmart operates 56 membership warehouse clubs across Central America, the Caribbean and Colombia, following the Costco-style model of a small number of high-volume clubs, bulk merchandise, and an annual membership fee that renews at a high rate. Growth has come from a steady drumbeat of new club openings, most recently concentrated in Colombia, a market of roughly 52 million people where the company only has ten clubs today versus, for example, nine in much smaller Costa Rica -- so there is real runway left to fill out the current countries before any new-market risk is needed. We based this valuation on owner earnings -- cash generated by the business after the reinvestment needed to keep the existing store base running, before the discretionary spending used to open new clubs. Over the last ten fiscal years this has averaged, on a normalized basis, about $1.89 per share, after adding back non-cash charges such as depreciation, and after backing out stock-based compensation and the swings in working capital that make any single year's cash flow noisy. Two of the ten years came out close to zero or slightly negative purely because of the timing of new-store construction spending relative to that year's revenue growth -- not because the underlying business weakened, since revenue and net income grew in both of those years. Using the median of the ten years, rather than the most recent or most favorable year, smooths through this construction-timing noise. The most recent full year (fiscal 2025, ended August 2025) grew revenue about 7% and net income about 6.5% versus the prior year. Our base case assumes 7% annual growth for the next three years, easing to 6% and then 5% as the store base matures, which is below the growth rate the raw owner-earnings number showed most recently (that figure was unusually high because of favorable working-capital timing, not a sustainable trend). Beyond the ten-year forecast, we treat PriceSmart as a renewing business: memberships are recurring, and the maintenance spending already deducted from owner earnings is what keeps the existing clubs running, so a modest continuing growth rate (about 1% a year) is reasonable rather than assuming the business shrinks to nothing. That continuing-value estimate makes up roughly two-thirds of the total value in our base case, which is typical for a business with a durable, renewing customer relationship, but it does mean the valuation leans heavily on PriceSmart's clubs remaining as durable and well-patronized a decade from now as they are today. Our bear case assumes the currency devaluations the company has periodically absorbed in Colombia, the Dominican Republic, Jamaica and Trinidad become more frequent and are only partly offset by price increases (as happened with the Colombian peso in fiscal 2023), permanently trimming margins, while new-club growth slows to one or two clubs a year as the easier expansion opportunities are used up. In this case owner earnings per share is roughly flat to slightly declining over the next decade before leveling off, and the shares would be worth about $28. Our bull case assumes successful, faster build-out in Colombia and continued favorable currency movements like the Costa Rican colón's recent strength, supporting high-single-digit growth for several years before moderating; in that case the shares would be worth about $69. Put together, we estimate the shares are worth roughly $57 today at the midpoint, with a reasonable range of $28 to $69 depending mainly on how currency conditions in PriceSmart's markets evolve and how successfully the company keeps expanding in Colombia. Given the width of that range, the margin-of-safety price sits meaningfully below the midpoint estimate, at around $37 a share, to leave room for the downside case. Total debt (about $187 million) is modest relative to the roughly $260 million of operating cash flow the business generates annually, so leverage is not a material risk here. One item we could not fully reconcile from the filings is the exact composition of the 'other operating assets and liabilities' cash-flow line in certain years, which we treated as a working-capital item consistent with how it reconciles against net income and depreciation; this did not create any reconciliation gap larger than about 1% in the years we checked.