Starbucks Corporation (SBUX), Petmed Express Inc (PETS): A Stock With 43% Upside — Driven By An Extremely Loyal Market

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In addition to organic growth, Petmed Express Inc (NASDAQ:PETS) could also be a great takeover target for a large online retailer looking to dominate the pet pharmaceutical market. Wal-Mart Stores, Inc. (NYSE:WMThas already launched its own online pet pharmacy. But a merger with fellow online heavyweight Amazon.com, Inc. (NASDAQ:AMZNwould have incredible synergy and operational scalability for PetMed — and put a large premium on its shares.

Petmed Express Inc (NASDAQ:PETS)’s strong financial profile — $50 million in cash and equivalents and no long-term debt — will likely enable it to invest in growth and reward shareholders. The led the company to increase its dividend by 13% in its most recent quarter, to a healthy 4.4%.

Risks to Consider: Petmed Express Inc (NASDAQ:PETS) needs to expand its product portfolio in order to cash in on the fast-growing pet supplies market in addition to pharmaceuticals. There is also concern about Wal-Mart’s entry into the pet pharmaceuticals space. Although growth is still strong, larger online retailers pose a threat.

Action to Take –> Trends in pet ownership and spending remain bullish. And Petmed Express Inc (NASDAQ:PETS) is a great way to cash in. In spite of all the good news, shares still look undervalued, trading with a forward price-to-earnings (P/E) ratio of 16, a sharp discount to its peer average of 23. If PetMed carried that same forward P/E of 23, shares would jump to $22, a 43% premium from current levels.

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– Michael Vodicka
The article A Stock With 43% Upside — Driven By An Extremely Loyal Market originally appeared on StreetAuthority and is written by Michael Vodicka.
Michael Vodicka does not personally hold positions in any securities mentioned in this article. 
StreetAuthority LLC owns shares of PETM in one or more of its “real money” portfolios.

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