PetMed Express, Inc.

PETS Details

PetMed Express, Inc. (NASDAQ: PETS) runs a pet pharmacy in the United States that sells prescription and non-prescription pet pharmaceuticals and other pet healthcare supplies directly to consumers. PETS' product portfolio includes over 3,000 Stock Keeping Units (SKUs) of pet pharmaceuticals, health items, and supplies.

Latest Update:

• Appointment of Key Executives: PETS announced the hiring of three new executives to the organization on January 10, 2022. These additions play a significant role in PetMeds®' digital transformation, with each new leader bringing a distinct skill set.

 Financial Highlights: Q3FY22 (ended on December 31, 2021)

 Source: Company Website

• Sales Performance: In Q3FY22, the Company's sales were USD 60.72 million, down from USD 65.89 million in Q3FY21.
• Decrease in Bottom Line: The Company's net income was USD 4.26 million in Q3FY22, which was lower by 44% than USD 7.61 million in Q3FY21.
• Regular Dividend: The Company pays dividends to its shareholders regularly, and on February 18, 2022, it paid a quarterly dividend of USD 0.30 per share (Q3FY22).
• Strong Balance Sheet: As of December 31, 2021, the Company's cash position was USD 108.91 million, with no debt. Furthermore, in Q3FY22, the Company's current ratio was 5.44x, compared to the industry median of 1.84x.

Key Risks:

• Regulation Risk: PETS is subject to stringent regulatory oversight, and failure to comply might result in a recall or perhaps the suspension of its pharmacy license.
• Geographical Business Risk: California, Florida, Texas, New York, Pennsylvania, North Carolina, Georgia, and Virginia accounted for 51% of PETS net sales in FY21. As a result, any suspension or revocation of the business's pharmacy license in these places might harm Company's bottom line.

 Valuation Methodology: EV/SALES Multiple based Relative Valuation

(Source: Analysis by Kalkine Group)

Stock Recommendation:

The Company expects to make gains in the coming quarters and expand its professional health and wellness solutions. The stock has a 52-week high and low of USD 46.67 and 21.64.

Considering the correction of 24.60% in the stock price in the past year, strong balance sheet, associated risks, and current valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 26.45, up by 6.57% as of February 24, 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Year Technical Price Chart (as of February 24, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.