North Americans love to spend on their beloved pets. According to the American Pets Products Association, owners spent $50.96 billion on their pets in 2011, up from $48.55 billion in 2010. It is currently projected that pet owners will spend close to $53 billion in 2012. Let's take a look at some of the biggest names associated with the pet industry.
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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 only cents off of its 52 week high. Fundamentally, PETM is also attractive with a forward P/E ratio of about 18.92 and a current price-to-sales ratio of about 1.20. PETM is up over 35% so far in the year.
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.
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 roughly 49% 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 the last few years but began an uptrend in 2012. PETS is up nearly 15% 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 12.86 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 up about 6% 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. NEOG is up over 42% 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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