Critical Review: Metcash (OTCMKTS:MCSHF) versus PriceSmart (NASDAQ:PSMT)

PriceSmart (NASDAQ:PSMT) and Metcash (OTCMKTS:MCSHF) are both consumer staples companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, institutional ownership, dividends, analyst recommendations, profitability, risk and earnings.

Dividends

PriceSmart pays an annual dividend of $1.40 per share and has a dividend yield of 0.8%. Metcash pays an annual dividend of $0.26 per share and has a dividend yield of 14.5%. PriceSmart pays out 26.9% of its earnings in the form of a dividend. Metcash pays out 135.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PriceSmart has raised its dividend for 4 consecutive years.

Insider and Institutional Ownership

80.5% of PriceSmart shares are owned by institutional investors. Comparatively, 29.0% of Metcash shares are owned by institutional investors. 17.0% of PriceSmart shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares PriceSmart and Metcash”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PriceSmart	$5.69 billion	0.95	$147.89 million	$5.21	33.51
Metcash	N/A	N/A	N/A	$0.19	9.32

PriceSmart has higher revenue and earnings than Metcash. Metcash is trading at a lower price-to-earnings ratio than PriceSmart, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares PriceSmart and Metcash’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
PriceSmart	2.82%	12.16%	6.67%
Metcash	N/A	N/A	N/A

Analyst Ratings

This is a summary of recent ratings and target prices for PriceSmart and Metcash, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PriceSmart	0	0	2	0	3.00
Metcash	0	1	0	0	2.00

PriceSmart presently has a consensus target price of $198.00, suggesting a potential upside of 13.40%. Given PriceSmart’s stronger consensus rating and higher possible upside, research analysts clearly believe PriceSmart is more favorable than Metcash.

Summary

PriceSmart beats Metcash on 13 of the 14 factors compared between the two stocks.

About PriceSmart

PriceSmart, Inc. owns and operates U.S.-style membership shopping warehouse clubs in the United States, Central America, the Caribbean, and Colombia. The company provides basic and private label consumer products under the Member's Selection brand, including groceries, cleaning supplies, health and beauty aids, meat, produce, deli, seafood, and poultry. It offers electronics, large and small appliances, automotive, hardware, sporting goods, seasonal products, clothing, domestics, and home furnishing products. In addition, the company offers food and bakery services, as well as health services, such as optical, audiology, and pharmacy. Further, it operates an e-commerce platform for online ordering, curbside pickup, and delivery services. PriceSmart, Inc. was incorporated in 1994 and is headquartered in San Diego, California.

About Metcash

Metcash Limited operates as a wholesale distribution and marketing company in Australia. It operates through Food, Liquor, and Hardware segments. The Food segment distributes a range of products and services to independent supermarket and convenience retail outlets. The Hardware segment distributes hardware products to independent retail outlets; and operates company owned retail stores. The Liquor segment engages in the distribution of liquor products to independent retail outlets and hotels. It sells its products under the IGA, Foodland, Mitre 10, Home Hardware, Total Tools, Cellarbrations, IGA Liquor, and the Bottle-O brand names. Metcash Limited was founded in 1927 and is based in Macquarie Park, Australia.