My company has really stepped up recently in fixing my workload problem. Last month we hired 2 new employees and they are now getting up to speed. I have 2 more starting in June. With 10 less hours worked a week, I'm now able to focus more time back on whats important. Getting myself out of a paycheck income model.
I wouldn't have thought I would ever have invested in a pet store but this came up on my screen back in February. I've kept my eye on it and they just missed their last quarter estimates. I'm not seeing anything terrible and I really like their long term growth plans to combat against Amazon stepping into the pet arena with Wag.com
As always, Fastgraphs.com really tells the story of PETM quickly and easily. They took a hit to the price in January which is what got my attention. Now they are more undervalued historically that at any recent time. Of particular note is that not even the Financial Crisis of 2008 hit them this bad.
The only number that concerns me is the EPS drop in 2008 but we need to keep in mind what occurred at that time in the world and everyone took a hit. I won't count that one against management.
The yield is a concern but PETM makes up for it with a huge dividend growth rate. PETM averages over a 4% share buyback a year.
I wouldn't have thought I would ever have invested in a pet store but this came up on my screen back in February. I've kept my eye on it and they just missed their last quarter estimates. I'm not seeing anything terrible and I really like their long term growth plans to combat against Amazon stepping into the pet arena with Wag.com
PETSMART (PETM)
Last Updated: Q1 2014
Description: PetSmart, Inc. supplies products, services and solutions for the lifetime needs of pets. The Company operates a website for pet supplies, foods and different animal needs. The Company's stores also feature pet styling salons that offer pet grooming services, from full-service styling to baths, toenail trimming and teeth cleaning.
How do they make money: Petsmart sells pet supplies covering a range of needs. They also have in store services such as boarding and grooming.
Key Brands: Simply Nourish, Authority and Great Choice. PetSmart focuses on exclusive and proprietary brands.
Company Overview
Source of sales
Consumables: 55.4%
Hardgoods: 31.7%
Services: 11.6% (drives in store foot traffic)
Live Pets: 1.6%
Store breakdown
Petsmart: 1,340
Pethotel: 200
Banfield: Veterinary services
65% of U.S. households own pets
Exclusives: Martha Stewart, National Geographic, Puppies R Us, Disney
Long term plans
1: Expanding our proprietary and exclusive products and services (36% of sales in Q1 2014)
2: Growing our most valuable customers
3: Connecting with pet parents in an authentic and personalized way
Risks
Brick and Mortar vs Amazon: Amazon has launched Wag.com to compete for pet needs.
Mitigation: Long term plans tackle this issue. They are also testing ordering online and picking up in a local store.
Competitors
Amazon (AMZN) via Wag.com
Petco (Private company)
Walmart (WMT)
Company Fundamentals
As always, Fastgraphs.com really tells the story of PETM quickly and easily. They took a hit to the price in January which is what got my attention. Now they are more undervalued historically that at any recent time. Of particular note is that not even the Financial Crisis of 2008 hit them this bad.
Company Stats
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014e
|
5y Avg
|
10y Avg
|
Share Price
|
$25.66
|
$28.86
|
$23.53
|
$18.45
|
$26.69
|
$39.82
|
$51.29
|
$68.34
|
$72.75
|
$67.05
|
$59.85
|
$42.24
|
EPS
|
1.3
|
1.36
|
1.99
|
1.55
|
1.62
|
2.05
|
2.59
|
3.61
|
4.07
|
4.34
|
3.332
|
2.448
|
EPS Growth
|
-
|
4.62%
|
46.32%
|
-22.11%
|
4.52%
|
26.54%
|
26.34%
|
39.38%
|
12.74%
|
6.63%
|
22.33%
|
16.11%
|
P/E
|
19.74
|
21.22
|
11.82
|
11.90
|
16.48
|
19.42
|
19.80
|
18.93
|
17.87
|
15.45
|
18.30
|
17.26
|
P/B
|
5.5
|
3.9
|
4.1
|
3.3
|
2.2
|
2.8
|
4
|
5
|
6.3
|
5
|
4.62
|
4.21
|
The only number that concerns me is the EPS drop in 2008 but we need to keep in mind what occurred at that time in the world and everyone took a hit. I won't count that one against management.
Dividend Stats
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014e
|
5y Avg
|
10y Avg
|
Dividend
|
$0.12
|
$0.12
|
$0.12
|
$0.12
|
$0.33
|
$0.47
|
$0.55
|
$0.64
|
$0.72
|
$0.82
|
$0.64
|
$0.40
|
Dividend Yield
|
0.47%
|
0.42%
|
0.51%
|
0.65%
|
1.24%
|
1.18%
|
1.07%
|
0.94%
|
0.99%
|
1.22%
|
1.08%
|
0.87%
|
Share buyback %
|
2.74%
|
4.29%
|
5.26%
|
4.72%
|
1.60%
|
5.04%
|
4.39%
|
3.64%
|
5.77%
|
-
|
4.71%
|
4.16%
|
Div Growth
|
-
|
0.00%
|
0.00%
|
0.00%
|
175.00%
|
42.42%
|
17.02%
|
16.36%
|
12.50%
|
13.89%
|
20.44%
|
30.80%
|
EPS Payout Ratio
|
9.23%
|
8.82%
|
6.03%
|
7.74%
|
20.37%
|
22.93%
|
21.24%
|
17.73%
|
17.69%
|
18.89%
|
19.70%
|
15.07%
|
The yield is a concern but PETM makes up for it with a huge dividend growth rate. PETM averages over a 4% share buyback a year.
Earning Report Notes
Q1 2014
EPS: +6.1% (below estimates)
Lowered 2014 estimates $4.48 -> $4.34
Comparable same store sales: -0.6%
Proprietary and Exclusive items account for 36% of sales.
Services: +4%
Q4 2013
EPS: +19.6%
Comparable same store sales: +1.2%
Full 2013
Comparable same store sales: +2.7%
Cashflow Dividend Payout ratio: 8%
Company and Industry specific commonly used acronyms and terms
None
Resources
Company Website: http://www.petsmart.com/
Investor Relations: http://phx.corporate-ir.net/phoenix.zhtml?c=93506&p=irol-irhome
Morningstar: http://quotes.morningstar.com/stock/petm/s?t=petm
Transcripts: http://seekingalpha.com/symbol/PETM/transcripts
Disclaimer: The investments and trades discussed are not recommendations for others.
I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
Buying back shares at a P/B of 5 seems inferior to just reinvesting the cash (unless there is absolutely no way to reinvest). By keeping X$ in the company they would grow the companies bookvalue by X$. If they buy back shares at P/B of 5 they are basically using X$ to increase the bookvalue of the remaining shares by X/5 $.
ReplyDeleteP/B is one metric to evaluate a company and I don't disagree with you here. It would be nice if the P/B was lower for them to be buying stock back.
DeleteBut its never really low. Even in 2009 with the Housing bubble bursting and the Financial crisis... it got down to 2.2