Pet IQ...Not Your Mother's Pets.com

rollandthomas (74)in #money • 8 years ago

Do you remember Pets.com, you know, they had the popular sock puppet as the mascot who was interviewed by People magazine and appeared on Good Morning America? Do you remember Pets.com, it sold pet accessories and supplies direct to consumers over the Internet at one-third the price it paid to obtain the products? Do you remember Pets.com, the poster child of the dot-com bubble that burst?

Well, Pet IQ isn’t your mother’s Pets.com

Pet IQ, Inc. develops, manufactures, and distributes pet medications, and health and wellness products for dogs and cats in the United States, Canada, and Europe. It offers pet prescription medications, including products for arthritis, thyroid, and diabetes and pain treatments, as well as heartworm preventatives, antibiotics, and other specialty medications; over-the-counter medications and supplies, such as flea and tick control products in various forms comprising spot on treatments, chewables, and collars; and health and wellness products consisting of specialty treats and other pet products, which include dental treats and nutritional supplements. The company provides its products primarily under the VetIQ, PetAction Plus, Advecta, PetLock Plus, and TruProfen brands. It sells its products through distributors as well as through retail stores, including approximately 40,000 retail pharmacy locations.

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A couple of weeks ago, Pet IQ reported Q2 revenue of $171 million, a 96% year over year increase and earnings killed the estimates, which was more than two thirds above Wall Street expectations. It also reiterated full year 2018 adjusted EBITDA growth of 79% to 102% to $40 million to $45 million.

The Pet IQ opened 17 wellness centers and three regional offices during the quarter, making the total, 29 wellness centers and 34 regional offices in operation.

"We believe our category leadership, broad product portfolio, compelling service offerings, value proposition and strong customer relationships will continue to fuel our future growth and value for our shareholders," PetIQ CEO Cord Christensen said in a press release.

This is the extent of my knowledge of Pet IQ. However, what I do know is pet owners will do practically anything for their cat or dog. Cats and dogs are an extension of their owner and at times treated better than loved ones. Back in the Egyptian times, dogs and cats were laid to rest in elaborate tombs decorated with inscriptions, furnished with treasure and scented by incense. It’s believed that dogs and cats improve human physical and mental health.

The pet industry, including pet food, generated more than US$221 billion in direct, indirect and induced economic impact in the US in 2015, according to a study conducted by George Mason University.

According to this report, US$77 billion is spent by US consumers on their pets annually. Pet food and veterinary services are the two leading sources of spending within the industry.

The largest savings was determined based on a lower incidence of physician office visits by pet owners as compared to non-owners. According to the study, 132.8 million pet owners in the United States visit a doctor 0.6 times less than the average non-pet owners. The average cost of a physician office visit is US$139. Pet owners, in this way, were responsible for saving US$11.37 billion in US health care costs.

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In the United States, in terms of quantity, cats and dogs are ranked #2 and #3 among pets.

So it appears Pet IQ has a good business model that actually services a need. Nevertheless, lets go to the charts to see where price is headed.

Pet IQ just broke out of a $10 range that dated back to when they went public in July of 2017.

However, the move looks exhausted, don't chase price, the break out should pull back, with the potential to fill the gap at $28. So if you believe in the Pet IQ story, a good entry price is near $28.