MWI Veterinary Supply, Inc. (MWIV), Petmed Express Inc (PETS): These Highly Defensive Animal-Related Companies Look Attractive

It seems that one industry that has become highly defensive in recent times is the pet industry. It would appear that no matter how hard the economic situation has become, pets still get care and attention from their owners.

In addition, pets require almost constant medical attention as this guidance from the Royal Society for the Protection of Animals in the UK shows:

When puppies and kittens are born they are usually protected from infections by their mother’s milk, providing she has been regularly vaccinated. However, this protection only lasts a few weeks so they need regular vaccinations from an early age.

Puppies are typically vaccinated at eight and 10 weeks, kittens at nine and 12 weeks, with an initial course of two injections. Your young pet should then be given a booster 12 months after their first vaccination.

Pet treatments are needed
So, like the market for human pharmaceuticals, pet treatments are in demand. In addition, demand for animal pharmaceuticals is not limited to dogs and cats. Zoetis , which was recently spun off from parent Pfizer, develops and produces animal health medicines and vaccines for livestock around the world. A more defensive play than a company that just supplies the pet market, Zoetis is experiencing near record demand for its products as beef and pork consumption rises in China and the African continent starts to develop — there are now several large multi-national farming conglomerates operating on the African continent. Currently, Zoetis is only generating 2% of its revenue in China, but this figure should be set to rise dramatically in the near term.

Moreover, as this link shows, the number of animals around the world being farmed is going nowhere but skyward. It has become common practice for farmers to vaccinate their animals to stop the spread of disease, which can destroy hears and livelihoods.

Having said all of that, I believe that despite its defensive nature, Zoetis still looks expensive. Currently trading at 19.3 times forward earnings, the company looks overpriced when compared to competitors Pfizer, Sanofi, Merck, and Novartis, which all trade at average forward earnings multiples of 13.2.