Positions I’m Watching: Petmed Express (PETS)

By: Stacey Nickens

October is National Adopt a Shelter Dog Month. In honor of that, ELM3 decided to sponsor a local shelter pup, Roxbury. Along those lines, you may also consider reviewing positions in the company, Petmed Express (PETS). PETS sells pet medications and supplies to consumers and offers an investment opportunity among small-cap stocks. With so many mega-cap and technology stocks trading at hefty valuations, a small-cap investment such as PETS can offer more grounded diversification opportunities for a portfolio.

PETS is currently trading near fair value at around $32 a share and offers a dividend yield of 3.4%. This yield is projected to remain relatively stable over the next year. Indeed, PETS has offered a fairly consistent dividend for the past five years, their average 5-year yield clocking in at around 3.7%. With a beta of 0.71, PETS also offers the opportunity for less volatility in a portfolio. (A beta lower than one indicates that a stock has been less volatile than the broader market.) This lower beta may be attractive to investors who prefer stock exposure but are nervous ahead of the election and COVID vaccine possibilities.

Additionally, S&P 500 companies are expected to post a total 3.5% drop in revenue during the third quarter, according to FactSet. However, the healthcare sector is expected to see revenue growth. In fact, the healthcare sector is expected to see the largest revenue growth of all 11 S&P 500 sectors. Noting this, PETS can be an opportunity to increase a portfolio’s exposure to the healthcare sector. PETS releases their Q3 earnings report next Monday, October 19, and following that announcement, you can review if their revenue growth reflects broader sector expansion.

Interested in other investment opportunities? Review this analysis of the gaming company Zynga. 

Sources: Morningstar, FactSet

Disclosures: Past performance is not a guarantee or a reliable indicator of future performance. All securities carry a unique set of risks subject to a variety of factors. There is no guarantee that these investment strategies will work under all market conditions or that they are are suitable for all investors. This material has been distributed solely for informational purposes and should not be considered as individual investment advice or recommendation. Individuals should consult their investment professional prior to making an investment decision.