Over the past year, stringent social distancing norms and a shift to living, working, and learning at home resulted in greater at-home food consumption and, consequently, a higher demand for groceries. Also, as consumers continue to focus on nutrition and consuming more healthy foods, retailers are investing to benefit from this growing demand. Furthermore, to capitalize on the rising demand, many grocery retailers have been investing heavily to improve their online presence and delivery networks.

The global food grocery retail market is expected to grow at a 5% CAGR in the coming seven years. Rising income levels, affordability, and growing urbanization are the key factors that will help the industry grow.

So we think that Investors looking to cash in on the industry’s solid growth prospects could bet on under-the-radar grocery stocks PriceSmart Inc. (PSMT) and Weis Markets Inc (WMK). These concerns are well-positioned to gain significantly in the coming months.

PriceSmart Inc. (PSMT)

PSMT in San Diego, Calif., owns and runs membership shopping warehouse clubs throughout Central America, the Caribbean, and Colombia. Its warehouse clubs provide brand name and private-label consumer products and services to individuals and businesses. The firm operated 47 warehouse clubs in 12 countries and one U.S. territory as of February 3, 2021.

During its fiscal  third quarter, ended May 31, 2021, PSMT’s revenue increased 11.9% year-over-year to $895.26 million. The company’s operating income increased 50.4% year-over-year to $36.05 million over this period. Its net income increased 77.3% year-over-year to $22.53 million, while its EPS grew 78.1% from the prior-year quarter to $0.73.

A $3.28  consensus EPS estimate for the current year represents a 28.6% improvement year-over-year. Also, PSMT has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The $3.6 billion consensus revenue estimate for the current year represents an 8.2% increase from the same period last year. The stock has gained 24.2% over the past year and 6% over the past nine months.

PSMT's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

PSMT has also been given  an A grade for Stability, and a B for Value. In addition,  within the A-rated Grocery/Big Box Retailers industry, it is ranked #6 of 40 stocks.

To see additional POWR Ratings for Growth, Momentum, Quality, and Sentiment for PSMT, click here.

Weis Markets Inc (WMK)

WMK operates as a grocery retailer in Pennsylvania and neighboring areas. The Sunbury, Pa.-based company  runs stores primarily under the Weis Markets brand and trademarks for its product lines and promotions, including Weis, Weis 2 Go, Weis Great Meals Start Here, Weis Gas-n-Go, and Weis Nutri-Facts. The company operated 197 retail food shops as of December 31, 2020.

In April, WMK announced that it would invest $135 million in its operations in 2021. The company plans to invest in new stores, remodels, fuel centers, information technology improvements, and execute more than  one thousand minor retail enhancement initiatives in the coming years.

During its second fiscal quarter, ended June 26, 2021, WMK’s net sales came in at $1.05 billion. Its operating income was  $45.56 million. The company reported $33.47 million in net income, while its EPS amounted to $1.24 over this period. The stock has gained 17.6% year-to-date and 8.3% over the past month.

It is no surprise that WMK has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Stability, and a B for Value and Quality. In the Grocery/Big Box Retailers  industry, it is ranked #12 of 40 stocks.

In addition to the POWR Ratings grades we have just highlighted, one  can see the WMK ratings for Growth, Momentum, and Sentiment here.

PSMT shares were trading at $82.13 per share on Monday afternoon, down $0.12 (-0.15%). Year-to-date, PSMT has declined -9.15%, versus a 19.66% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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