Maybe the folks running TriadHospitals or LifePointHospitals should just forget about the people-treating business and get into the animal hospital business. After all, unlike the human hospital market, veterinary care specialist VCA Antech
Revenue for the quarter rose more than 23%, and though operating margins were a little sluggish on an annual comparison (due mostly to stock options expense), they did improve from the first quarter. Besides, it's not as though better than 22% operating income growth is "bad" anyways. VCA Antech's bottom-line growth was also quite strong, as adjusted earnings rose nearly 30%.
Below the waterline, there didn't seem to be a lot that was new. The laboratory business continues to post organic revenue growth in the mid-teens and improve margins. On the hospital side, acquisitions are still a big part of the growth plan (same-store growth of 5.4% versus overall growth of almost 26%), but margins have continued to improve quarter to quarter. It's also worth noting that the technology business broke into the black for the first time this quarter.
I can see a lot of arguments for continued growth at VCA Antech. As a pet owner, I'm all too aware of what advanced medical care costs and equally aware of the willingness of many pet owners to pay up. As for whether or not VCA Antech is "recession proof," as some suggest, I'm not as sure. I know pet owners will still want to do what's best for their animals, but if times get hard enough, I'm sure there are folks who won't be able to go for the expensive procedures.
It's also almost certainly true that there is ample room for more practice acquisitions. Like any other profession, there are a lot of baby boomers in veterinary practice, and I'll imagine that in the next 10 years or so many of them will want to cash out or monetize their investment in their practices. Though the company still has quite a bit of debt, it's paying it down, and that suggests there will be available capital to continue to buy attractive practices.
I still don't find the shares especially cheap, but that's one Fool's opinion. So for now I'd probably rather own PetSmart
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).