Petsmart in the doghouse
Petsmart is the leading specialty provider of products, services and solutions for the lifetime needs of pets in North America. In FY 12 (Jan.), PETM had an industry-leading $6.1 billion in revenue. PETM opened 45 net new stores in FY 12, and operated 1,232 retail stores in North America at January 29, 2012, including 73 in Canada and five in Puerto Rico.
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PETSMART is the leading pet supply store in the North America. Using the Purple Chips approach, we believe that under $62.00 the shares are at a low valuation.
PETM trades at 17X earnings based on the adjusted trailing 12 months EPS of $3.55 per share. Their Return on Capital (ROC) is 37.2% and they have an earnings yield of 7.9%. The market capitalization is $ 6.5 billion.
LOW VALUATION IN PETSMART INC AT $USD 62 (PETM, $USD 61.80)
S&P rates PETM at 4* with an $80.00 target. Based on a continuation of the current earnings trend, the Purple Chips target is $78.00 in 12 to 18 months.
