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Profits and Pets
06/10/2014 8:00 am EST
Pet owners love to spoil their pets; all told, we have 218 million pets in this country and the average family spends $500 a year on their pets, observes Briton Ryle, editor of The Wealth Advisory.
And this month, we have a great way to play this growing trend. PetMed Express (PETS) sells prescription and non-prescription pet medications, health products, and supplies for dogs and cats under the business name 1-800-PetMeds.
PetMed Express just finished its fiscal 2014 on March 31. The results were decent. Net income for the year was $0.90 a share, $0.04 (4.7%) a share better than 2013. Net sales rose 2.4% to $233.4 million.
The company maintained its $0.68-a-share annual dividend (paid quarterly). That works out to a solid 5% yield.
Now, PetMed Express is not growing like wildfire. Still, given the size of the pet medication and supply market, there is tremendous upside for companies in this space. Even a small gain in market share for PetMed Express would make for a substantial boost in revenues and earnings.
One problem is marketing costs. PetMed Express has to spend money to make money. So, while cost cutting is good, we need to see more money spent on better marketing to really push growth.
Fortunately, CEO Mendo Akdag said—on the latest conference call—that a new marketing campaign is rolling out now.
Flea and tick season is the bread and butter for this company, so the current quarter and next quarter are critical. It's supposed to be a hot summer, and with new marketing, things should align for a couple good quarters.
In general, analysts are not forecasting much growth for PetMed Express in fiscal 2015. In other words, expectations are low.
If PetMed Express' new marketing campaign is successful, there will be good upside for the shares. We rate Pet Med Express a “buy” under $13.50 a share. Our one-year price target is $17.
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