Animal-loving investors may be interested in exploring opportunities in the pet industry. While there are altruistic reasons for supporting companies that focus on the well-being of our furry friends, pet stocks have also seen impressive growth over the past decade, which was accelerated by the pandemic.
With everyone locked indoors, the pandemic really re-shaped how many people previously thought about pets. Therefore, this is a space that’s seen higher interest in post-pandemic years, despite a return to more normal levels over the past four or five quarters. With the pandemic being over, investors are looking past pet stocks and those of other sectors that received short-term headwinds. Fair enough.
But the longer-term secular growth catalysts for this space remain intact. On that note, here are three top pet stocks I think are worth buying for 2023 and beyond.
Zoetis (NYSE:ZTS) provides a variety of commodities and services for pets such as medications, immunizations, testing equipment and biodevices to eight core animal species. The company also offers various wellness products which include anti-infection treatments, dermatology solutions and medicated feed additives.
According to Bloomberg reports on April 5, 2023, Zoetis has been given an average “buy” rating by eight analysts covering the stock. This is not unexpected, considering the organization’s status as an international innovator in pet wellness and its presence in more than 100 countries.
Zoetis has a solid financial position with a current ratio of 2.37 and a quick ratio of 1.63, significantly higher than industry norms. This indicates that Zoetis has adequate resources to fulfill its current financial obligations.
With an annual dividend payout of $1.50 per share, ZTS stock currently yields 0.8%. Additionally, Zoetis has announced that it would deliver a quarterly payout of $0.375 per share to investors on April 21st. Zoetis has maintained its dividend payouts due to its strong profitability, with net margins of around 26%.
The growth in pet ownership in the U.S. is expected to benefit the stock as the pet industry saw an expenditure of over $126 billion in 2021, which can be attributed to the rise in pet ownership. According to data, in 1988 57% of American families owned at lease two animals. This number increased to 70% in 2020.
The final quarter of 2022 saw Trupanion (NASDAQ:TRUP) report income of $246 million, up 27% from the same period the previous year and the 61st consecutive period where the business had a rise in revenue of over 20%.
Trupanion experienced a surge in pets enrolled, with the total number of pets growing by 31% to exceed 1.5 million in the fourth quarter due to favorable industry trends. The company’s customers remained satisfied with the value proposition, as the average monthly retention rate stood at 98.7% during the quarter.
Despite the net loss per share of $0.23 that Trupanion reported in the fourth quarter, it is not unexpected for a company operating in a still-growing industry. As Trupanion aims to capture more market share in this developing sector, the company has been increasing its capital expenditures, reflected in its rising losses.
Trupanion has an excellent opportunity for substantial growth as it has the financial capacity to continue taking the appropriate actions to expand. The organization has $153 million in net funds and temporary investments as of December 2022. To put that into context, at the average cost of acquiring a pet in 2022, which was $289, the company has enough resources to add approximately 530,000 pets to its existing pet base.
IDEXX Laboratories (IDXX)
IDEXX Laboratories (NASDAQ:IDXX) is a high-quality provider of a range of products and services catering to veterinary clinics and other industries. Thus, it’s no surprise to many that IDXX stock continues to attract investor interest.
IDEXX Laboratories seems poised for a promising future, anticipating profit growth of 46% over the next few years. This projected growth in profit is likely to result in increased cash flow, which in turn should lead to a higher valuation of the company’s shares.
IDXX stock has outperformed its industry competitors, implying that the possibility of further gains due to mispricing is slim. Nevertheless, the positive outlook for the company is promising, and investors should look into other factors to capitalize on any future price decline.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.