VCA, Inc. :WOOF-US: Earnings Analysis: Q3, 2016 By the Numbers : October 28, 2016

VCA, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of VCA, Inc. – Abaxis, Inc. (ABAX-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 656.85 million, Net Earnings of USD 58.23 million.
  • Gross margins narrowed from 24.95% to 23.49% compared to the same period last year, operating (EBITDA) margins now 20.45% from 20.53%.
  • Year-on-year change in operating cash flow of -14.58% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 551.72 533.72 563.44 653.49 656.85
Revenue Growth (%YOY) 10.44 11.21 12.81 19.08 19.06
Earnings (mil) 54.85 63.6 46.23 64.05 58.23
Earnings Growth (%YOY) 99.82 124.25 20.69 17.96 6.16
Net Margin (%) 9.94 11.92 8.2 9.8 8.87
EPS 0.67 0.78 0.57 0.78 0.71
Return on Equity (%) 18.07 20.54 14.24 18.19 15.36
Return on Assets (%) 9.09 10.3 7.15 8.77 7.29

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Market Share Versus Profits

Revenues History
Earnings History

WOOF-US‘s change in revenue this period compared to the same period last year of 19.06% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that WOOF-US is holding onto its market share. Also, for comparison purposes, revenues changed by 0.51% and earnings by -9.09% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 23.49% to 24.95% for the same period last year, while operating margins (EBITDA margins) went from 20.45% to 20.53% over the same time frame.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

WOOF-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 3.40 days from 6.23 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

WOOF-US‘s change in operating cash flow of -14.58% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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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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