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PetSmart (PETM) Off To A Strong Start In Pre-Market Activity

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified PetSmart ( PETM) as a pre-market leader candidate. In addition to specific proprietary factors, Trade-Ideas identified PetSmart as such a stock due to the following factors:

  • PETM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $201.5 million.
  • PETM traded 10,342 shares today in the pre-market hours as of 8:32 AM.
  • PETM is up 10.9% today from yesterday's close.

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More details on PETM:

PetSmart, Inc., together with its subsidiaries, operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada. The stock currently has a dividend yield of 1.3%. PETM has a PE ratio of 14.7. Currently there are 2 analysts that rate PetSmart a buy, 2 analysts rate it a sell, and 15 rate it a hold.

The average volume for PetSmart has been 2.4 million shares per day over the past 30 days. PetSmart has a market cap of $5.9 billion and is part of the services sector and specialty retail industry. The stock has a beta of 0.43 and a short float of 17.5% with 5.53 days to cover. Shares are down 16.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates PetSmart as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, notable return on equity, largely solid financial position with reasonable debt levels by most measures and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • PETM's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 1.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PETSMART INC has improved earnings per share by 6.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PETSMART INC increased its bottom line by earning $4.03 versus $3.55 in the prior year. This year, the market expects an improvement in earnings ($4.34 versus $4.03).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market, PETSMART INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Specialty Retail industry. The net income increased by 1.3% when compared to the same quarter one year prior, going from $102.42 million to $103.77 million.

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