Under the Radar: Pet Meds' Prescription

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"Under the Radar" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

Since the recession hit, consumers have resorted to online bargain-hunting. As a result, Internet retail has become an investing safe haven.

Amazon.com(AMZN Quote), the largest online retailer, has seen its shares soar 54% in 2009. But at $79 a share and a price-to-earnings ratio of about 50, Amazon is no bargain. Here is a small-cap Internet retailer that offers strong fundamentals at a good value.

Pompano Beach, Florida-based PetMed Express(PETS Quote) markets prescription and nonprescription medications and health products for dogs, cats and horses. The company was founded in 1996 and immediately caused controversy by undercutting vets and helping to diagnose animals. A series of lawsuits and investigations ensued. Pet Meds, as the company is known, settled for a small sum, reformed its business model and resumed growth.

Today, Pet Meds is thriving. The company just concluded a record fiscal year, capping 12 consecutive quarters of earnings growth. Revenue for the quarter that ended on March 31 rose 19% to $48 million as net income increased 15% to $5.65 million and earnings per share climbed 25% to 25 cents. The sales turnover ratio, a measure of sales relative to current assets, improved to 2.68.

In addition, PetMed Express has a superlative financial position. The balance sheet holds zero debt and over $30 million of cash and cash equivalents. A quick ratio of 4.72 indicates the firm is sufficiently capitalized to withstand a significant decline in business. TheStreet.com Ratings considers a quick ratio of 1 to be adequate for most companies.