VCA Antech: To Hold or Not to Hold
Thursday, February 28th, 2008
By Mitchell Clark, B.Comm. for Profit Confidential
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.
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
