PesoRama Inc. operates a chain of retail stores in Mexico. Its stores offer household goods, pet supplies, seasonal products, party supplies, health and beauty, snack food items, confectionery, and other products. The company operates its stores under the JOi Canadian Stores brand name. As of June 14, 2022, it operated 20 stores. PesoRama Inc. is based in Toronto, Canada.

Canada

PesoRama Inc.

Consumer Defensive

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

PESO.V reported revenue of CAD 16mn in the last 12 months, up 20% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 4% from FY23 to CAD -0.15.

The stock has been growing steadily in the past six months, adding 41% in total. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 42ppts in total. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is 'fair'.

The company has reported very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -15.3% in the last 12 months, up from -34.2% in FY23. 

Historically, PESO.V has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -33.7%, a growth from -51.8% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to -37.4% in the last 12 months, an increase from -56.5% in FY23. 

PesoRama Inc. reported a return on equity (RoE) of 422.5% in the last 12 months, up from -196.5% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to -72.0%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -6.7 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

PESO.V has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity may be unstable and becomes extremely unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to weak positions in its industry, bleak profitability, negligible return on capital, poor working capital management, inadequate interest coverage, poor cash flow generation, and an unfavourable capital structure. We note resilient historical revenue growth and low margin volatility, among the positive credit factors. 

In highly turbulent market conditions, PESO.V is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, PESO.V is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense. 

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. 

PesoRama Inc.

CA$ 0.19

3

PesoRama Inc.

CA$ 0.19

3

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Risk / Profitability

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CA$ 0.19

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