VCA, Inc. – Value Analysis (NASDAQ:WOOF) : December 14, 2016

Capitalcube gives VCA, Inc. a score of 44.

Our analysis is based on comparing VCA, Inc. with the following peers – IDEXX Laboratories, Inc., Patterson Companies, Inc., Henry Schein, Inc., Heska Corporation and Abaxis, Inc. (IDXX-US, PDCO-US, HSIC-US, HSKA-US and ABAX-US).

Investment Outlook

VCA, Inc. has a fundamental score of 44 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative outperformance over the last year has faded more recently.
  • VCA Inc.’s current Price/Book of 3.43 is about median in its peer group.
  • The market expects WOOF-US to grow more slowly than its peers and for its median ROE to decline.
  • WOOF-US employs relatively high amounts of assets while generating relatively median profit margins.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • WOOF-US‘s return on assets has improved from below median to about median among its peers over the last five years.
  • The company’s relatively low gross margin and median pre-tax margin suggest operations may be constrained on pricing versus peers.
  • While WOOF-US‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s capital investment seems appropriate for a business with peer median returns.
  • WOOF-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

WOOF-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 18.29% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 8.63%), and a well-cushioned interest coverage level of 12.44x, WOOF-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 5 peers for the company have an outstanding debt balance.

WOOF-US has maintained its Quick & Able profile from the recent year-end.

  • WOOF-US‘s interest coverage has declined 2.93 points from last year’s high and is now below its five-year average interest coverage of 13.86.
  • The decrease in its interest coverage to 12.44x from 15.38x (in 2015) was also accompanied by a decrease in its peer median during this period to 19.96x from 22.47x.
  • WOOF-US‘s debt-EV continues to trend upward but is still within one standard deviation below its five-year average debt-EV of 21.00%.
  • While its debt-EV increased to 18.29% from 16.65% (in 2015), its peer median decreased during this period to 8.63% from 10.76%.
  • Relative to peers, debt-EV rose 3.77 percentage points.

Access the detailed analysis for VCA, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
IDEXX Laboratories, Inc. 10.06 1.07 10.7 28.54
Patterson Companies, Inc. 22.65 1.94 9.1 26.49
Henry Schein, Inc. 7.2 1.61 27.47 74.79
Heska Corporation 0.55 2.76 87.63 1371.53
Abaxis, Inc. 0.04 7.71 No interest exp 11094.1
VCA Inc. 18.29 1 12.44 29.14
Peer Median 8.63 1.77 19.96 51.97
Best In Class 0.04 7.71 No interest exp 11094.1

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Company Profile

VCA, Inc. engages in the provision of veterinary services and diagnostic testing to support veterinary care. It operates through the following segments: Animal Hospital and Laboratory. The Animal Hospital segment includes the operation of animal hospitals and provision of pharmaceutical and retail products for pet wellness programs, health examinations, diagnostic testing, routine vaccinations, spaying, neutering and dental care. The Laboratory segment involves testing and consulting services used by veterinarians in the detection, diagnosis, evaluation, monitoring, treatment, and prevention of diseases and other conditions affecting animals. VCA was founded by Robert L. Antin, Arthur J. Antin and Neil Tauber in 1986 and is headquartered in Los Angeles, CA


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