Shares of PetMed Express (PETS) - Get Report rose 6.5% Monday to a new 52-week high of $20.87 after the pet pharmacy operator reported fiscal first-quarter earnings results that beat analysts estimates.
With the stock now up 20% year to date and trading at all-time highs, how much better can things get amid what some pundits are calling an overheated market? The company's fundamentals are intact, as evidenced by the 14% rise in operating Income.
Revenue, however, grew just 1.2% during the quarter and far from breathtaking. So taking some profits off now seems like the smarter play, especially following 11% gains in one month. Take a look at the chart, courtesy of TradingView.
PetMed shares closed Monday at $20.55, surging 4.6%. The stock has now skyrocketed almost 82% in the past 12 months, crushing the 4% rise in the S&P 500 (SPX) index during that span. The strong double-digit surge over the past month, which sent the PETS beyond its 20-day and 50-day averages, has outpaced the 8% rise in the Vanguard Health Care ETF (VHT) - Get Report .
The tepid 1.2% first-quarter revenue growth, which missed Street estimates by more than $1 million, is still an issue. PETS is priced for growth given that the shares trading at all-time highs and up more than 80% in 12 months. But growth is not what the company has delivered so far. Fiscal year revenue estimates of $239 million calls for just 2% growth above fiscal 2015. And estimates of $242 million for fiscal 2017 implies just 1% growth.
What's more, fiscal 2016 earnings estimates of $1.06 implies growth of 3.92%, which is just below the 5% growth you can get from the average S&P 500 stock. Yet, PETS is priced at a forward price to earnings multiple of 19 or about two points above the index's P/E of 17.
So where's the value? At best, the stock should be priced at around $18 or 12% lower, which means take your profits and wait for the shares to reach support at $18.19 (green line).
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.