North Americans love to spend on their beloved pets. According to the American Pets Products Association, owners spent $48.35 billion on their pets in 2010, up from $45.5 billion in 2009. It is currently projected that pet owners will spend around $50 billion in 2011. Let's take a look at some of the biggest names associated with the pet industry.
TUTORIAL: Budgeting Basics
Pet Supplies
The largest, publicly traded pet supply retail is PetSmart (Nasdaq:PETM) with around 1,150 stores and an additional 750 animal hospitals. Interestingly enough, PETM has been seeing sales growth and steady margins. The stock has been strong, currently a dollar off of its 52 week high. Fundamentally, PETM is also attractive with a forward P/E ratio of 16.74 and a current price-to-sales ratio of only 0.91. PETM is up 20.5% so far in the year.
Animal Health
Spending on doggie toys has not been slowing, so it comes as no surprise that the money going to maintain pets' health is following the trend. Therefore, investors who are interested in investing in the growth in spending on pets can also choose to look at companies that run the animal hospitals or supply the medicine administered by the veterinarians. (For related reading, see The Economics Of Pet Ownership.)
MWI Veterinary Supply (Nasdaq:MWIV) is a distributor of animal health products to veterinarians and animal hospitals. The company was able to flourish during the recession, and revenues increased by 20% in 2010 over 2009 numbers. MWIV is up 9.3% year to date.
While MWIV supplies its products to doctors, PetMed Express (Nasdaq:PETS) markets its prescription and non-prescription pet medications directly to the consumer via 1-800-PET-MEDS. PETS has been on a downward trend throughout this year. Underperforming ratings and other analyst downgrades did nothing to help this situation. PETS is down 45.8% on the year.
Hospitals and Testing
VCA Antech (Nasdaq:WOOF) operates in three divisions: animal hospitals, laboratories and medical technology. The company is trading at an attractive 12.76 forward P/E ratio, however growth could be questioned if the economy does not pick up faster. After all, an elective surgery for the family pet could be put on hold until the family's finances improve, whereas food and toys will be a constant expenditure. WOOF is down 17.2% on the year.
Neogen (Nasdaq:NEOG) is an interesting play because it is involved in food and animal safety products. The animal safety division focuses on drugs, vaccines, medical equipment and diagnostic tests that can be sold directly or through large farm supply retail chains. The most impressive fact about NEOG is its consistent revenue and earnings growth through bull and bear markets. NEOG is?down 8% year to date.
The Bottom Line
Animal-related stocks should hold up better than the overall market in the event of a new bear market and with solid growth may be positioned to join the party if stocks rally.
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