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PJ Pahygiannis
PJ Pahygiannis
Articles (149) 

Heska Still has Room to Run

Vet company up 50 percent this year

August 19, 2016 | About:

If you own a pet, your vet has probably utilized at least one of Heska's (NASDAQ: HSKA) laboratory services, blood analyzers, heartworm testing, or allergy assessments. Yet, the veterniarian services company also offers HD Digital Radiography, Digital Ultrasound and PACS imaging technologies. The company has drawn in investors through clobbering earning estimates quarter after quarter. But is the stock worth its price?

Discipline

Even more amazingly, management has been able to deliver strong performance accompanied by increases in not only revenue, but also operating income, while still increasing earnings with disciplined spending. Yet the stock has been more than kind to investors, up an astounding 49.3% in the past year.

Heska's vaccines and pharmaceuticals segment delivered the most impressive results. Revenue increased 74% over the prior year for the vaccines and pharmaceuticals segment, while blood analyzers and consumables segment of the company has not stopped taking market share. While management raised research and development costs up $750,000, these increased costs have resulted in one new product being approved for 2017. Not to be outdone, gross profit rose 23%, while operating expenses only ended up being 4.9% of sales.

While launching new products might be the fuel to Heska's success, management is not about to stray off the slow and steady course they have been on. Heska is not just a blood testing company, they are also a technology company. And with technology comes the need to test.

While management has been successful in executing its acquisition strategy, efficiently integrating them and deriving relationships from them is key. But management also understands the international market and the opportunities that are in those markets. One interesting thing that president and CEO Kevin Wilson mentioned on the earnings call was that they see the company utilizing a cell phone pricing like model, where their own subscriptions are priced differently in different markets.

One of Heska's biggest advantages is getting larger, more premium animal hospitals as customers. The company has seen an increase in sales from customers upgrading their digital imaging capabilities, while also winning over new customers. But the Heska portfolio of products as a whole is also thriving. While the company may be spending more on research and development, those costs are leading to more and product launches throughout the year.

In the Heska's earnings results, investors got a look at just how dominant and hungry both the company as a whole and management have been and will be. People love their pets and vets love their jobs, both are why Heska will contine to grow

Disclosure: No position in the stock mentioned.

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