Consumers are spending on their pets at a breakneck pace. The industry is approaching $70B, and shows no signs of slowing.
There are several ways to play the pet industry. These five smallcap pet companies may get your portfolio out of the doghouse. With all the money you spend on him, maybe Fido can help pay for your retirement.
Let’s start with the basics, pet food. Freshpet, Inc. (NASDAQ: FRPT), as the name suggests, provides fresh, natural pet food that pet owners buy and store in the refrigerator. Apparently pets like the natural ingredients, as the stock has gone from just under $20 in early 2018 to over $38.
The stock sports a high forward (price-to-earnings) P/E ratio of just over 136, but offsets that with expected earnings growth of 660% next year. Investors may want to wait for a pullback to enter positions, with the stock moving straight up from $30 over the past month.
PetMed Express, Inc. (NASDAQ: PETS) based out of Delray Beach, Florida, provides prescription and non-prescription drugs for pets. The company had a recent setback missing quarterly earnings, but that has placed the stock at a support level just above $35.
PetMed has a forward P/E ratio of only 14.91, and is growing earnings this year at 45%. The company also has profit margins of over 14%.
The company said it missed earnings due to increased competition and advertising costs. However, if they can become the go to name in pet medication, the stock may reward investors who can sit through building market share.
While they may compete with PetMed in some areas, PetIQ, Inc. (NASDAQ: PETQ) provides additional offerings, such as premium dog treats. PetIQ’s stock has been a top performer this year, rising from the low $20s to over $40.
The company is growing earnings by over 100% this year, but is still in growth mode and has minimal earnings. But with a forward P/E of 41, the company is expected to begin making money next year.
PetIQ’s strategy of teaming with veterinarian’s to promote pet health hand-in-hand with their products appears to be working. Expanding their footprint in retail, in combination with this strategy, should keep the pet health company on the rise.
While the U.S. is still trying to figure out the best insurance scheme, Trupanion, Inc. (NASDAQ: TRUP) has become a billion dollar company by selling pet insurance. The company has performed well this year, rising from under $30 to over $37, only after visiting a high of just below $46.
With over half of Fortune 500 companies offering pet insurance as an employee benefit, Trupanion has a growing base. Rising interest rates should also benefit the pet insurer.
Growth in the pet industry, equates to growth in insurance. If you’re feeding your beloved pet premium fresh food, giving them regular vet appointments, and investing in their well being, why wouldn’t you have insurance?
Finally, if everyone is taking their pets to the vet, and has medical insurance, how about a company that does the lab work for all those patients? Heska Corp. (NASDAQ: HSKA) is a diagnostic laboratory providing veterinary clinics with a range of health tests.
The stock came under pressure earlier in the year, but has rebounded nicely and is up almost 28% in 2018. Heska has averaged 57% earnings growth over the past 5 years.
By providing lower cost solutions than vet clinics can perform in-house, the company is becoming the go-to provider of pet lab testing. There is no reason the company can’t continue to execute and pick up market share in this growing market.
These five smallcaps are in a growth industry that is focusing more quality attention on the family pet. Growing at different rates and at different maturity levels, one of these pet-focused stocks should make a friendly contribution to your portfolio.
Disclaimer: The author and Spotlight Growth has no positions in any of the stocks mentioned in this article. Nor does either party currently have any relationship, or any other conflicts of interest, with any of the companies mentioned in this article. This content is meant for informational and entertainment purposes only and should not be meant as a recommendation to buy or sell any securities. Please visit a licensed financial representative to determine what investments are right for you.
Article By: Steven Adams