Speculative Trade - VCA Antech (WOOF) - Update
WOOF had great execution in Q3. Solid revenue growth, especially same-store and lab revenue growth, indicating the usual healthy business. WOOF had nice margin expansion, return on capital improvement and shareholder value creation, in our opinion. So, why is the stock down you ask...
Unfortunately, we believe the guidance is being misunderstood by the market, which is mostly made up of investors who are not closely familiar with WOOF. This is not the first time this has happened, so it's particularly frustrating that the market does not get it. WOOF is a perennial UPOD or master of "Under Promising, Over Delivering", to quote Cramer. Unfortunately, in raising its guidance by 2 cents, WOOF presented guidance that is 1 cent below consensus of $1.15 for the year, and implies a weak Q4. Q4 is apparently not running any differently than the stellar trend that has persisted through the years, and we strongly believe WOOF will earn $1.16 to $1.17 for the year. Unfortunately, it was completely misunderstood after hours.
Hopefully some analysts will get on the horn and point this out, but if they have "hold" or lower recommendations on the stock, you should not expect them to. Those guys are waiting for the stock to get cheaper to upgrade it. Analysts with "buys" on the stock should be pounding the table this morning!
On the conference call, I brought it up to bring attention to it, decipher it for the confused market and clear up the confusion and concern of the market. This is an attractive stock relative to quality, growth and valuation. Hopefully, by sometime this morning the market will get that the guidance is actually positive news, as was the performance this quarter. If the stock opens lower, it presents a wonderful arbitrage buying opportunity, as you can benefit from the difference created by this guidance, which we believe will prove conservative as usual. This is a lesson that no matter how confident you are in a company, it doesn't hurt to hedge a little. This is one of my favorite stocks to own over the next 3 to 5 years. My best to you WOOF owners. (disclosure)
Unfortunately, we believe the guidance is being misunderstood by the market, which is mostly made up of investors who are not closely familiar with WOOF. This is not the first time this has happened, so it's particularly frustrating that the market does not get it. WOOF is a perennial UPOD or master of "Under Promising, Over Delivering", to quote Cramer. Unfortunately, in raising its guidance by 2 cents, WOOF presented guidance that is 1 cent below consensus of $1.15 for the year, and implies a weak Q4. Q4 is apparently not running any differently than the stellar trend that has persisted through the years, and we strongly believe WOOF will earn $1.16 to $1.17 for the year. Unfortunately, it was completely misunderstood after hours.
Hopefully some analysts will get on the horn and point this out, but if they have "hold" or lower recommendations on the stock, you should not expect them to. Those guys are waiting for the stock to get cheaper to upgrade it. Analysts with "buys" on the stock should be pounding the table this morning!
On the conference call, I brought it up to bring attention to it, decipher it for the confused market and clear up the confusion and concern of the market. This is an attractive stock relative to quality, growth and valuation. Hopefully, by sometime this morning the market will get that the guidance is actually positive news, as was the performance this quarter. If the stock opens lower, it presents a wonderful arbitrage buying opportunity, as you can benefit from the difference created by this guidance, which we believe will prove conservative as usual. This is a lesson that no matter how confident you are in a company, it doesn't hurt to hedge a little. This is one of my favorite stocks to own over the next 3 to 5 years. My best to you WOOF owners. (disclosure)
posted by The Greek | 8:15 AM
0 Comments:
Post a Comment
<< Home