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Nicholas Kitonyi
Nicholas Kitonyi
Articles (409)  | Author's Website |

PetMed Fails to Woo Investors After Earnings Miss

The stock is down more than 12%

January 19, 2021 | About:

Shares of online pet pharmacy retailer PetMed Express Inc. (NASDAQ:PETS) plunged more than 12% on Tuesday following the release of its third-quarter results. The Delray Beach, Florida-based company announced its earnings for the period ended Dec. 31 missed Wall Street's expectations.

The company has now lost more than 25% in market value since hitting a 52-week high of $41.83 on July 16. PetMed still looks relatively overvalued at a trailing price-earnings ratio of about 20.26 compared to the Peter Lynch fair value of 15.

Highlights from third-quarter results

PetMed posted earnings of 38 cents per share, up from 34 cents reported a year ago. However, this was slightly below the FactSet consensus earnings estimate of 39 cents.

The company's top line for the quarter grew to $65.9 million, which was slightly better than the consensus Street estimate of about $64.3 million. CEO and President Menderes Akdag attributed PetMed's relatively good performance to "strong reorder sales and increasing gross and operating margins during the quarter."

PetMed kept the quarterly dividend unchanged at 28 cents per share, which based on the current stock price of $30.33 equates to a forward dividend yield of 3.69%. The dividend is payable on Feb. 12 to shareholders of record Feb. 1, with the ex-dividend date set on Jan. 29.

This could provide a short-term demand for the stock after failing to woo investors following the announcement of its quarterly results.

Valuation

From a valuation perspective, shares of PetMed are trading at a forward price-earnings ratio of about 19.46, which is relatively better than fellow pharmaceuticals retailer Rite Aid Corp.'s (NYSE:RAD) equivalent of 43.14. However, Walgreens Boots Alliance Inc.'s (NASDAQ:WBA) forward price-earnings ratio of 9.35 trumps both.

Nonetheless, both Walgreens and Rite Aid are unprofitable based on the trailing 12-month earnings. Investors could look at this as a significant positive for PetMed given the circumstances within which it has managed to deliver a positive bottom line.

Many retailers struggled over the last 12 months due to the adverse effects of Covid-19, but PetMed managed to grow both top line and bottom lines on a year-over-year basis.

In summary, shares of PetMed appear to be relatively overvalued compared to the Peter Lynch fair valuation. Its forward price-earnings ratio of about 19.46 suggests the company expects a slight improvement in earnings over the next 12 months. At the current price, it could take a while before the stock goes on a major rally.

Disclosure: No positions in the stocks mentioned.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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