PetSmart, Inc. (PETM) has an impressive growth trajectory, which is only improving, giving shares a Zacks #1 Rank (Strong Buy). Additionally, the stock pays a 1.2% dividend.
Company Description
PetSmart is a large retailer for, you guessed it, pet products and services like toys, food, medicine, pets themselves, grooming, and training. The company has over 1,200 stores in North America as well as an established online presence.
Income Jumps 22%
On Nov 16 PetSmart reported third-quarter results that showed an 8% improvement in revenue, to $1.5 billion. Same store sales were up just over 6%.
Net income came in at $56 million, up 22% from $46 million. Earnings per shares worked out to $0.50, 2 cents better than the Zacks Consensus Estimate. PetSmart has beaten expectations in 14 of the past 15 quarters after meeting expectations 5 periods ago.
Estimates on the Rise
After the company went on to raise guidance, analysts did as well. The Zacks Consensus Estimate for this fiscal year is up 8 cents, to $2.54 on the news.
Next year’s average forecast is up 15 cents, to $2.98. Last year PetSmart made $2.01 per share, which puts expected growth rates at 26% for fiscal 2012 and 17% for next year.
Valuations and Comparison
Right now shares of PETM are going for just under 20 times forward estimates, which puts the PEG ratio at 1.3. So, the growth is fairly priced here. The price to sales at 0.9 times looks a bit lofty, but is not outside the norm for other specialty retailers.
Speaking of its peers, PETM is at the top of the 28-company list. The industry comes in at 36th out of 256 on Zacks.com. PetSmart’s ROE is an impressive 24% compared to the industry average at 13%.
The Chart
You can see PetSmart’s consistent earnings growth below. Each colored line is a particular year’s consensus estimate and they are climbing year over year, as well as throughout each year. That is exactly what you want to see.
Read the August 31st Feature Here
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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