PetSmart, Inc. (PETM), Petmed Express Inc (PETS), Zoetis Inc (ZTS): How to Profit From the Popularity of Pets

In the company’s annual report, management points out that supplies and medicines were the second fastest growing category in the pet products sector in 2012, rising 6.8%. Only boarding and grooming grew faster, over 10%.

This company unfortunately experienced a decline in revenue from $238 million in 2012 to $228 million in 2013. But results improved for the company substantially in its first quarter of its new year. It reported a 7.6% increase in revenue and a 20% jump in net income. It also added 207,00 new customers compared to 197,000 the year before.

The not-so-secret sauce of its business model is re-orders. It becomes so easy to get more medication, that their customers aren’t tempted to shop elsewhere.

New kid on the block

Zoetis Inc (NYSE:ZTS) is new but not to the animal care industry.  This company was formerly the animal health segment of Pfizer and just became an independent entity on June 24. Zoetis Inc (NYSE:ZTS) isn’t a small company by any means: revenue was over $1 billion in the first quarter, an increase of 4% over the same quarter last year. Net income spiked 26% to $140 million.

The company markets its products — which include veterinary vaccines, medicines and diagnostic products — in 120 countries. One of their its companion animal products is Convenia, which fights bacterial skin infections in dogs and cats. This is a $15 billion company, that pays out a dividend of around 1%, and trades with a P/E around 33.

What we learned

These stocks have a lot to offer investors now and over the long term. As the economy continues to improve, pet parents will be even more liberal in their spending on their beloved companions. PetSmart, Inc. (NASDAQ:PETM)‘s industry leading position should be maintained because big box retailers aren’t able to offer the same variety, information, and atmosphere.

IBISWorld projects 4% annual revenue growth for pet stores between 2013 and 2018. Petmed Express Inc (NASDAQ:PETS) is experiencing a clear rebound in its business after having a slowdown in customer growth last year. Zoetis Inc (NYSE:ZTS) global reach allows it to take advantage of increasing demand for animal medicines in all parts of the world. Each of these companies will benefit from the continued strength of the pet products market and should be fine investments going forward.

The article How to Profit From the Popularity of Pets originally appeared on Fool.com and is written by Brian Hill.

Brian Hill has no position in any stocks mentioned. The Motley Fool recommends PetSmart. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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