If the U.S. health care system were run likePetSmart (
), people probably wouldn't be arguing about it.
The company touts Total Lifetime Care for pets. PetSmart has
full-service veterinary hospitals in roughly two of every three
PetSmart offers a wide variety of additional services and
products: supplies, styling salons, training, PetsHotels with
temperature controlled rooms, day camp for dogs, and in-store
adoption centers for homeless pets.
While folks nowadays are willing to pay up for pet care, a
recession can force consumers to scrimp. PetSmart saw annual
earnings slip 2% in fiscal 2009 ended in January and grow only 5%
in fiscal 2010.
In fiscal 2011 and '12, earnings jumped 26% and 27%. The
Street expects 29% EPS growth this year.
Fundamentals are generally good. The Composite Rating is 98,
just shy of a best possible 99. The three-year EPS Stability
Factor is 4 and the five-year rating is 8. The scale runs from 0
(calm) to 99 (erratic).
Operating cash flow per share is excellent -- 88% above EPS
last fiscal year. Return on equity is 25%, at least a nine-year
high. Pretax margin is 7.3%, tying for the company's highest in
at least nine years.
The Relative Strength line is just off a 52-week high, and the
up-down volume ratio is a mildly bullish 1.1.
PetSmart's Retail-Specialty Group was No. 17 of 197 industry
groups, as of Wednesday's IBD. Within the group, PetSmart's
ratings trail onlyGNC Holdings (
) andUlta Beauty (
The stock's annualized dividend yield is 1%.
Drawbacks have to begin with the market itself, which is
struggling. Also, sales growth has been in single digits for the
past four fiscal years. Previously, sales growth was 10% to 13%
for five years.
Funds have lightened stakes over the past two quarters -- from
817 funds with 59.9 million shares to 787 funds with 55.5 million
PetSmart cleared a 59.18 buy point in a flat base in late
April and early May, but volume was weak.
The stock corrected 7% and then gapped up in strong volume off
the 50-day line. PetSmart is extended, even from the 5% chase
zone set up from the buy point.