Cashing in Before Stock Sees the Doghouse
PetSmart (PETM) PetSmart is the leading specialty provider of products, services and solutions for the lifetime needs of pets. Petsmart operates 1,232 retail stores in North America, including 73 in Canada and 5 in Puerto Rico.
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We originally bought PETM on April 4, 2013 under $62.00. Since then we have seen the shares rise above cost and then fall below cost. The volatility has been high, but what is most worrisome is that the forecasted earnings have been reduced as the company faces greater competition.
Petsmart is a well-run retailer in an attractive segment, but we believe that the valuation may face headwinds so we prefer to look elsewhere for lower risk opportunities.
EXIT PETSMART AT $USD 71.01 (PETM $71.03)FULL POSITION
TOTAL RETURN (including dividends) +16.7%
PURPLE CHIPS TARGET: $71.00 POSITION SIZE: FULL (5.0) P/E: 17.0X DIV: $0.78 (1.09%) MKT CAP: $7.0B Debt: $260M RETURN ON CAPITAL: 48.9% EARNINGS YIELD: 9.8% 5 YR EPS Growth rate*:16.7% P/E/G Ratio: 1.02 EPS: $4.18 2015 EST.: $4.65 2016 EST.: $5.02
*Blended growth rate= 2/3 historical (5yrs), 1/3 forward.
