PetMed Express Becomes Anti-Recession Stock (PETS)

PetMed Express Inc. (NASDAQ: PETS) might have been one of those companies you have seen advertising on television. It even had what might been a red flag in that commercial as they are one of the few who have listed its NASDAQ stock ticker at the end.  Yet it has two things going for it.  It is as it sounds, in the pet medication business.  It also offers the same drugs and medications your vets give, but at a cost savings.  Pet owners hate to skimp on Fido and Fifi.  The opportunity of saving money on Fido and Fifi is not out of the norm.  The company did not just report a better-than-expected quarter.  It grew earnings and revenues and  its customer base.

The deliverer of pet-meds said that net sales rose 13% to $77.2 million.  Its reorder sales rose by 17%.  Profits grew by 23%.  Net income was $8.1 million, or $0.36 EPS.  We had the Thomson Reuters consensus estimates as $0.31 EPS and $76.2 million in revenues.

The internal metrics all appear to be solid as well.  Its operating expenses as a percent of sales improved by 180 basis points for the quarter.  Reorder sales rose by 17% to right at $54 million.  Online sales rose 18% to $51.8 million.  It grew its new customer count to almost 297,000 new customers in the quarter, up from 267,000 new customers in the same period a year ago.  And the customer acquisition costs were lower.  New customer acquisition costs fell by about 12% to $33 in the quarter versus $38 per customer a year ago.

This company actually has more than two things going for it.  You could think of it as the Amazon of pet medications.  Most of the internal metrics here look solid.  This is starting to look like it has one of those businesses which is scalable with much room for growth.  While we have not gone in to figure out the exact metrics used, ReportLinker gave a total distribution figure of $25.3 billion as the 2007 figure for the 2007 U.S. Pet healthcare market.

The company has grown its cash to $59.5 million from almost $ 38.6 million a year ago.  Its total liabilities grew as well, but at very manageable rates.  Those liabilities in total were listed as $17.3 million, up from $6.99 million a year ago.  The PetMed Express has a $389 million market cap now after a 3% gain this morning to $17.15.  Its 52-week trading range is $12.92 to $19.03.

JON C. OGG
JULY 20, 2009