A Recession-Proof Industry

When stock markets are reeling, I always like to think about which companies can best weather the storm. Frankly, there are many companies that can weather a recession easily. What can’t hold up very well are stock prices in the face of the unknown.

There’s one investment theme that stands out in my mind as one that is recession-resistant. I’m referring to the pet-care industry, which is a story that I’ve written about extensively in this column. The great thing about the pet-care business is that people don’t stop spending money on their pets. Even if there’s a recession, people still need to feed, vaccinate, and pamper their pets.

A long-time favorite company of this column is PetMed Express, Inc. (NASDAQ/PETS). You might have seen this company’s advertisements on the television. The company is America’s largest online small- and large-animal medicine provider. What a great business to be in. If you have pets or care for large animals, you know how expensive animal medications can be. If you know what to order, why not save yourself some money and order medicine directly? Why pay your vet an extra profit margin if you don’t have to?

Right now, PetMed Express is cheaply priced on the stock market. In its most recent quarter, the third quarter ended December 31, 2007, the company’s revenues grew 19% to just over thirty-seven million dollars, up from comparable revenues of almost thirty-one and a half million dollars.

Net income in the latest quarter was $4.4 million, or $0.18 per diluted share, as compared to net income of $2.8 million, or $0.11 per diluted share, representing an impressive gain of 60%.

According to the company, its latest quarter saw a record amount of new orders, with some 65% of all orders placed through the company’s web site. The company doesn’t have any debt and has plenty of cash to finance its growth.

If I were a buyer in this market, I would definitely consider this company right now. Things are a little silly in the equity market at this time and that’s why I’d be looking at a business that makes money regardless of all the turmoil.