A few weeks ago, I wrote about why it can sometimes be a good idea to invest after big gaps up on earnings (you can read the issue by clicking here). In short, stocks that jump significantly after reporting earnings often go on to outperform for several more months! Today’s recommended stock has that kind of potential. Here’s Patrick McKeough with the recommendation, from Wall Street Stock Forecaster.
“PetSmart, Inc. (PETM) recently hit a new all-time high after it reported strong earnings and sales for its latest quarter. The stock is now up 96.9% since we first recommended it at $32 in our October 2007 issue.
“The company is the biggest pet-supply chain in the U.S. In all, it operates 1,241 pet stores in the U.S. and Canada. It also has 194 in-store PetsHotels, which look after pets while their owners are away.
“In the first quarter of PetSmart’s 2013 fiscal year, which ended April 29, 2012, its earnings rose 33.5%, to $94.7 million from $70.9 million a year earlier. The company spent $175 million buying back its shares during the quarter. Due to fewer shares outstanding, earnings per share rose 39.3%, to $0.85 from $0.61.
“Sales rose 9.4%, to $1.6 billion from $1.5 billion. Same-store sales rose 7.4%, while sales of pet services, such as grooming, rose 8.3%. Services accounted for 11.1% of total sales.
“The company now expects to earn $3.19 to $3.31 a share in fiscal 2013, up from its earlier forecast of $3.02 to $3.16 a share. The stock trades at a reasonable 19.4 times the midpoint of the new range.
“PetSmart is a buy.”
- Patrick McKeough, Wall Street Stock Forecaster, June 2012