PetMed Express (NASDAQ: PETS) Stock: Top Dog in Online Pet Pharmacies

These days, people tend to treat their pets as true members of the family. If you are a pet owner, you understand the need for certain animal medicine products that keep your furry friends happy and healthy. While treatments like heartworm protection and flea medication might not appear as lucrative as other pharmaceuticals that can help to cure human ailments, the pet medicine market is actually growing at a rapid pace and should not be overlooked by savvy investors. In fact, according to the American Pet Products Association, sales for U.S. pet products and services reached a record-breaking $95.7 billion in 2019.

One company that is capitalizing on the rising demand for pet products is PetMed Express (NASDAQ: PETS), a business that produces and delivers roughly 2,500 of the most popular pet medication and health products. The stock is directly benefitting from the global pandemic as pet owners look to skip trips to the veterinarian in favor of at-home delivery of the products that their four-legged friends need. If you are interested in adding exposure to the growing pet medicine industry to your portfolio, this stock is definitely worth a look. It’s the top dog in online pet pharmacies for a reason and could reward investors with some nice gains over the next few years. Let’s take a deeper look at this company below.

PetMed Express Industry Leader

There’s a reason why PetMed Express is the undisputed industry leader in the online pet pharmacy space. The company’s business strategy is based on selling prescription and non-prescription medicines for pets at a discount and delivering them directly to pet owners’ doorsteps. We already know how convenient it is to shop online, and for pet owners, the delivery service offered by PetMed Express helps them skip a trip to the veterinarian and save money on the pet products that they need.

Part of PetMed’s success has to do with its marketing strategy which involves using national advertising campaigns to have consumers order by phone or online to increase the company’s brand recognition. The “1-800-PetMeds” brand name is strong and the company is a licensed pharmacy in 50 states which allows it to help customers easily obtain hard copy prescriptions if needed. The company also focuses on delivering excellent customer service and has a Net Promoter Score of 82.5%, which is in the top 2% of companies. PetMed Express is clearly doing something right, as it saw “Reorder Sales” of its medicines increase by 17% in Q4 2020. This tells us that PetMed’s customers are increasingly loyal to the brand.

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PetMed Express Solid Dividend Growth

We know that this company has a good hold on a growing industry, which is why investors can typically anticipate consistent revenue. This has allowed the company to grow its dividend over the years to reach a current dividend yield of 2.68%. The company offered a $0.18 per share dividend in 2016 that has grown to $0.28 per share today. The fact that PetMed Express was able to offer investors 55% dividend growth in such a short span of time is a testament to how successful the company has been at generating cash flows. The strong demand for pet products also makes this stock a solid bet for reliable dividend payouts regardless of what the economy is like.

PetMed Express Current Market Conditions Favorable

PetMed Express is another example of a company that is currently benefitting from the global pandemic. With tons of people staying home and practicing social distancing, e-commerce sales for PetMed have been rising. The company’s CEO Menderes Akdag stated in a recent press release that “During the March quarter, due to Covid-19, demand has been strong from the e-commerce channel. Consumers have been shifting their purchases to online, which has positively impacted our sales,” It’s likely that this trend will continue for the rest of the year which is great news for investors.

When it reported Q4 earnings in May, the business saw a 15% year-over-year increase in net sales as well as an 8.4% year-over-year increase in Diluted Earnings Per Share. It’s safe to say that it was a strong Q4 for this company and it will be interesting to see the positive performance continues when it reports Q1 earnings next week on July 20^th before market open.

PetMed Express Making Moves in July

This stock has already made a nice move up over 15% in the month of July and briefly touched all-time highs in trading this week. That upwards momentum could absolutely continue if the company beats analyst expectations after reporting earnings next week. Adding shares of PetMed Express is a nice way to gain exposure to a lucrative industry and get a stock that offers the potential for continued dividend growth, but keep in mind that you can always wait until after the earnings release before opening new positions to reduce your short-term risk.