Factors to consider:

Barchart technical indicators

  • 96% Barchart technical buy signal
  • Trend Spotter buy signal
  • Above its 20, 50 and 100 day moving averages
  • 6 new highs and up 11.17% in the last month
  • Relative Strength Index 70.89%
  • Barchart computes a technical support level at 58.58
  • Recently traded at 62.92 with a 50 day moving average of 57.24

Fundamental factors

  • Good following on Wall Street where 16 brokerage firms have assigned 23 analysts to look at the Company's numbers
  • Analysts predict revenue will increase by 9.50% this year and another 4.10% next year
  • Earnings are estimated to increase by 29.00% this year, an additional 10.90% next year and continue at an annual rate of 16.40% over the next 5 years
  • Those consensus projections resulted in 3 strong buy, 7 buy, 13 hold and no under perform or sell recommendations
  • If the numbers are met analysts look for a total annual return in the neighborhood of 9% - 11% over the next 5 years
  • The P/E ratio of 19.86 is above the market P/E of 14.40 but not out of line
  • The 1.01% dividend rate is less than 20% of expected earnings and lower than the market's dividend rate of 2.30%
  • The company enjoys a B+ financial strength rating
  • The store is more than a pet store and is carrying an upscale line of creature comforts
  • You can buy supplements for your pets produced by GNC, cat lovers can buy something from Martha Stewart's line
  • They even have Toys R Us sections and products by - of all people - Bret Michaels

Investor interest

  • The Street's own investor sentiment indicator is A+
  • Firms giving a thumbs up are Zack's, Oppenheimer, RBC Capital Markets, UBS and Credit Suiss
  • The last time he was asked Jim Cramer gave positive comments

Always compare a stock to it's peers. You might think these peers aren't comparable but they are all discretionary spending stocks. During the past year PetSmart was up 40% while Coach ( COH) was up 15%, Bed, Bath and Beyond ( BBBY). was up 32% and Luxottica ( LUX) was up 5%:

Compare the analysts projections for the other stocks with the projections for PetSmart given above:

Coach
  • Revenue +13.7% this year and +13.4% next year
  • Earnings +20.5% this year and +17.8% next year

Bed, Bath and Beyond
  • Revenue +8.60% this year and +4.60% next year
  • Earnings +13.80% this year and +11.00% next year

Luxottica
  • Revenue +2.4% this year and +13.0% next year
  • Earnings +13.90% this year and +19.20% next year

Summary: I look for Petsmart to continue to rise. The projections by analysts for increased revenue and earnings are there and the stock has no "underperform" or "sell" recommendations from Wall Street. The B+ balance sheet is good, and the price momentum is there.

My word of caution is that a lot of the price momentum has been in the most recent time period. Movement like that may signal a little something else that hasn't been disclosed yet. Use caution and please monitor the moving averages and the 14 day turtle channel for confirmation that the price increase was deserved:

Disclosure: At the time of publication, Jim Van Meerten did not own shares in any of the stocks mentioned in this post but they are in his watch lists.

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