Forgot your password?
New user?
Views
- State: Published
Document Actions
PETsMART Buyback May Inspire Breakout (PETM) 07/26/2005
PETsMART, which appeared on our Intrinsic Value Screen is well known for having an excellent management team and it shows in their decision-making. On June 27th PETM announced a share buyback worth $270M which will take place through to the end of fiscal year 2006. The company generates enough cash flow to justify this as well as investing in its business and paying a dividend (albeit a small one).
"This move demonstrates our confidence in the fundamental strength of
our business model, our strategy and our people, and we're confident
about the future," said Philip L. Francis, PetsMart chairman and chief
executive. "We have the cash and the balance sheet to invest in our
current asset base, continue to fund initiatives that are driving our
growth, and use opportunistic share purchases and ongoing dividend
payments to build shareholder returns."
PETM has an attractive balance sheet with $2.76 of cash per share a RoE > 20%, low debt and strong cash flows. It also has the strongest revenue growth of any of its direct competitors while remaining the most undervalued, with the lowest PEG value. The majority of the float (88%) is held by Institutions. Assuming they continue to maintain their holdings, the buyback should provide a significant longer-term boost to the share price, especially with the positive growth and earnings forecasts for PETM
Looking at the chart, we can see the makings of a triangle formation starting from mid-May 2005. A target price for breakout of this formation might be the breach of $32 on strong volume. However we should continue to watch the pattern developing and be prepared to refine the breakout point downwards if necessary.
PETM has an attractive balance sheet with $2.76 of cash per share a RoE > 20%, low debt and strong cash flows. It also has the strongest revenue growth of any of its direct competitors while remaining the most undervalued, with the lowest PEG value. The majority of the float (88%) is held by Institutions. Assuming they continue to maintain their holdings, the buyback should provide a significant longer-term boost to the share price, especially with the positive growth and earnings forecasts for PETM
Looking at the chart, we can see the makings of a triangle formation starting from mid-May 2005. A target price for breakout of this formation might be the breach of $32 on strong volume. However we should continue to watch the pattern developing and be prepared to refine the breakout point downwards if necessary.