Actions speak louder than words, as the old saying goes. So why does the media focus so much attention on what Wall Street says about companies instead of what it does with them?

Luckily for Wall Street watchers, the Internet brings us MSN Money's list of which companies the institutions are buying. True, we should be as skeptical of Wall Street's actions as we are of its words. But when the 115,000-plus lay and professional investors on Motley Fool CAPS agree with Wall Street's opinions, it just might be time for some buying.

Here's the latest edition of Wall Street's Buy List, alongside our investors' opinions of the companies involved:


Recent Price

CAPS Rating

(5 max):

PetMed Express  (NASDAQ:PETS)



Alaska Air Group  (NYSE:ALK)



Northwest Airlines  (NYSE:NWA)



Delta Air Lines  (NYSE:DAL)



US Airways  (NYSE:LCC)



Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Heedless of Warren Buffett's warning, Wall Street plunged headfirst into the airline industry last week. Yet mindful of that warning, Fools refuse to follow. The pinstripe-and-wing tips crowd may be buying everything with wings, but the CAPS community gives pretty much every company in this industry just one star. But if we don't love to fly (and it shows), what do we love?

Puppies and kittens.

And the company that caters to their needs:

The bull case for PetMed Express

  • poorwill introduced us to PetMed a couple years ago as an: "Internet pet medical supply co. Sells pet perscription medicine at a large discount to vets prices, by mail order. Also sells pet care products."
  • junkbondsman later pointed out that PetMed is already the: "leader in online pet drug sales," and a "potential take over candidate for larger pet company, either Petco, Petsmark, or other." (Note: I think he meant PetSmart (NASDAQ:PETM).)
  • But things could work out even better if PetMed doesn't get bought -- at least in JPDemers' opinion from a year ago last summer. Citing it: "Nice niche, a growing market, no debt, no serious competition, and good margins on products that are grossly overpriced at most regular outlets," JPDemers thinks that "[PetMed] can build on this platform, selling anything pet-related, and like Amazon (NASDAQ:AMZN) they could be the storefront for '' type businesses (no inventory, just a cut of the income)."

Reviewing the company's financials, I have to agree with our guest stock pickers this week. Not only does PetMed have no debt; it's got nearly $53 million in cash and short-term investments. As a result, while the stock may look at best fairly priced based on its 16.3 P/E and 17.5% projected growth rate, a closer look at the valuation reveals that this company is downright dirt cheap. Here's why:

First, net out the firm's cash to reveal its $321 million enterprise value. Next, divide that number not by the "earnings" PetMed reports under GAAP accounting strictures, but rather by the firm's $24.7 million of free cash flow. What you get at the end of all this is a firm selling for 13-times its free cash flow.

Foolish takeaway
At this price, if PetMed achieves its anticipated rate of growth, buyers should soon be as happy as a kitten on catnip, playing with a fresh roll of yarn.

Time to chime in
Of course, that's just my opinion. Click on over to Motley Fool CAPS, and tell us yours.

Motley Fool CAPS : It's fun, it's free, and it just might make you famous.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 865 out of more than 120,000 members. PetSmart and are Motley Fool Stock Advisor recommendations. The Fool has a disclosure policy.