Internet retail is the future of shopping. Purchasing items online is convenient for consumers and it's no surprise e-commerce sales continue to grow. Internet retail sales usually mirror the economy. If the economy is good, people have more disposable income and tend to spend more, therefore, internet retail sales go up. With the economy doing fairly well, there are good e-commerce stocks out there to buy.
So what are the best internet retail companies investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which three internet retail companies made the list. And when you're done be sure to read about which mid-cap oil companies to sell now. Year-to-date returns are based on May 6, 2015 closing prices. The highest-rated stock appears last -- read more to see which one is No. 1.PETS data by YCharts
3. PetMed Express, Inc. (PETS)
Rating: Buy, A-
Market Cap: $330.5 million
Year-to-date return: 13.5%
PetMed Express, Inc. and its subsidiaries, doing business as 1-800-PetMeds, operates as a pet pharmacy in the United States. The company markets prescription and non-prescription pet medications, health products, and supplies for dogs and cats.
"We rate PETMED EXPRESS INC (PETS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet & Catalog Retail industry. The net income increased by 9.4% when compared to the same quarter one year prior, going from $4.53 million to $4.95 million.
- PETS's revenue growth trails the industry average of 19.9%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PETS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.16, which clearly demonstrates the ability to cover short-term cash needs.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 29.06% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PETS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full analysis from the report here: PETS Ratings Report