This Under-The-Radar Stock May Have Just Won Earnings Season

This stock has gained more than 35% since reporting, but is it a buy?

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The company that wants to keep your best friend healthy may have just won this earnings season.

PetMed Express (NASDAQ: PETS) is up nearly 39% this week after the online pet pharmacy reported quarterly profits that crushed Wall Street’s expectations.

The company’s Q2 net income came in at $6.7 million, or $0.33 per share, which surpassed analyst estimates by a healthy 26%.

PetMed’s board also declared a quarterly dividend of $0.27 per share, payable on November 15, 2019, which represents a yield of around 4.15%. And the company also ended the quarter with $94.9 million in cash and cash equivalents, $19.1 million in inventory, and zero debt.

But while these figures sent the stock soaring, that’s arguably where the good news ends.

While net income for the quarter beat estimates, net income for the first six months of PetMed’s fiscal year was down by 38% year-over-year as the company was forced to lower prices in a competitive environment.

“Sales were negatively impacted by increased online competition and aggressive pricing in the market that forced us to reduce prices,” said PetMed CEO Menderes Akdag on the earnings call.

Credit Suisse, one of three firms covering the stock, said the stock’s improvements were tainted by a 16.2% decline in new customers as companies like Chewy (NYSE: CHWY) and Vetsource gain market share. 

“While PETS faces several challenges, with intensifying competitive dynamics, we admit 2Q marks a turnaround in PETS margin deterioration, a trend we expect to continue,” Credit Suisse analyst Erin Wright said.

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