VCA Antech: To Hold or Not to Hold

One of my long-time favorite companies pre-announced its fourth- quarter financial results. While fourth-quarter numbers are expected to be decent, the company’s outlook was reduced substantially.

VCA Antech, Inc. (NASDAQ/WOOF) is a company I’ve liked for a long time, but even the pet care business isn’t immune to the slowdown in the general economy. Not that this industry is hurting; it is still one of the most recession-resistant sectors of the economy.

This company announced that it expects to report quarterly earnings of between $0.28 and $0.29 per share based on fourth- quarter revenues of two hundred and eighty-four million dollars. The revenue number was just slightly below consensus expectations.

For all of 2007, the company expects to report earnings of between $1.40 and $1.41 per share on revenues of $1.16 billion. This was just as the Street expected.

The future, however, is where the problem is. Revenues are expected to grow somewhere between 13% and 15% in fiscal 2008, while earnings are expected to grow to between $1.55 and $1.60 per share. These growth expectations just weren’t enough for Wall Street and the stock sold off on the news.

If you do get to own a successful wealth-creating stock, there’s always the risk that you fall in love with the position for just a bit too long. In this case, there was no way to predict how the numbers would turn out. The stock was previously trading around $40.00 per share and, after the fourth quarter preannouncement, it sold off to $31.00 per share. It has now leveled off around $32.50 per share.

If I were a really long-term investor, I would keep holding this stock. If I were a more aggressive speculator, I’d hold out to see if the stock recovered a little more, then cash out and look for other opportunities.