Personal Finance

Love Your Pet? Here's How to Make Money on the Booming Pet Business

Pet In Hospital Exam
Pet In Hospital Exam

Image source: Getty Images.

The booming pet hospital business

VCA Inc (NASDAQ: WOOF) is a provider of pet hospitals and laboratories across the country. It's basically just a network of vet clinics because the company's strategy is to buy clinics to grow the network. On VCA's homepage, there's even a link for pet hospital owners who are considering selling their business.

Financially, the strategy is working very well. Recently reported third-quarter revenue jumped 19.1% from a year ago to $656.9 million, and operating income was up 10.2% to $107.0 million. For the full year, management expects earnings to be $2.87 to $2.97 per share.

As people spend more on pets, they're also performing more procedures and getting tests that haven't always been standard in the industry. That'll help VCA continue to grow, and the model of consolidating pet hospitals in a fragmented industry could lead to a profit boom long term.

The food-safety company

The fourth company on my list is Neogen Corporation (NASDAQ: NEOG) , which makes pharmaceuticals, vaccines, diagnostics, and other products for the animal food-safety market. Most of its animal business is serving veterinarians like VCA with the products they need.

There's also a food safety business that test for sanitation, spoilage, and allergens in food for animals and humans. And business is doing quite well. Fiscal first-quarter 2017 earnings announced in September showed a 12% increase in revenue to $83.6 million, and net income rose slightly to $9.9 million, or $0.26 per share.

The downside of Neogen is that it's a very expensive stock at a P/E ratio of 54 times trailing earnings. But if the company continues to grow and margins improve, it could still be a winner for investors long term.

Petco and Petsmart taken private

You may notice that two big names in pet retail -- Petco and Petsmart -- weren't on this list. That's because they were taken private by private equity firms. The big money has seen the growth in pet spending, and they like where the industry is headed.

That interest from private equity is another reminder that there's a lot of tailwind behind the pet business right now, and I don't see the momentum stopping. For pet lovers, these four companies are great ways to make money off of the industry's growth trend.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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