The two-year soft patch for Petmed Express Inc. (NASDAQ:PETS) may well be over; we'll know for sure on Monday. The two-year dry spell for faithful PETS shareholders may also be over. In fact, the chart says the stock's already in a new uptrend, and the company has a chance to cement that budding move into place when earnings are unveiled early next week.
First things first - the chart. Though PETS has been in a broad uptrend since late 2011, it's been an erratic and unreliable uptrend. The falling resistance line that kept that pullback going for so long was snapped in early 2013. And, thanks to some serious buying interest that's materialized in the past two weeks, Petmed Express shares have finally broken above a key resistance zone between $11.50 and $13.00.
That in itself is a great bullish clue, and were earnings not on the agenda for Monday (the 22nd), that may be enough to step in. Earnings are often a stock-moving catalyst though, and it's mot likely PETM is going to be an exception to that rule of thumb. The good news is, the company is very, very likely to post good news.
To call a spade a spade, Petmed Express probably deserved to see its shares pull back in 2011... not to the degree they did, but to pull back nonetheless. Per-share earnings slumped from 2010's peak of $1.14 (when pet-mania was still growing but few had learned how to compete with the online pet pharmacy company) to what would be a multi-year low of $0.80 by fiscal 2012. The tide started to turn last year though, with the company booking a bottom line of $0.86 per share, and putting itself on pace to earn a projected $0.87 this year. No, it's not much, but it does explain the stock's recovery. Take a look at the long-term chart of annual per-share earnings for PETM, which roughly mirrors the stock's chart.
A step in the right direction? Sure, but critics will be quick to point out that the growth rebound has been tepid so far (7% in fiscal 2013), and is projected to be even less impressive this fiscal year (+1%). Before coming to that conclusion, however, interested parties may want to take a detailed look at the last several quarterly per-share reports from Petmed Express Inc. In six of the last eight quarter, PETM has topped estimates... by more than a little. In its most recent three quarters, it's grown the bottom line.
Point being, analysts may be underestimating how well the company's going to do not just in fiscal Q1 of 2014 (which it just completed), but for the next three quarters as well.
Just in the interest of complete reporting, fiscal Q1 has historically been a tough one for the company; PETM missed in both of its most recent first quarters. The bigger picture is still showing improvement though, and there's a great chance the company could be on the verge of posting a surprising earnings beat. There's an even better chance it'll top earnings estimates for the next three quarters.
The chart says traders are starting to agree, and though the runup right in front of earnings has to leave one wondering if this is a "buy the rumor, sell the news" situation, even a post-earnings dip would be a buying opportunity.
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Bottom line? Though probably not worth getting into right now, barring anything but a skyrocketing stock after Monday's earnings announcement, Petmed Express Inc. should be a great longer-term buy.
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