Date of Data Capture: 30/8/2019
Name: NATIONAL VETERINARY CARE LTD (NVL)
Classification: Healthcare Services (Animal)
Current Price: $2.53
Market Capitalisation: $170M
Forecast EBITDA Growth: 22.78%
Yield Estimate: 1.78%
Consensus Price Target: $2.90
# Covering Analysts: 3
Discount at Current Price: 14.62%
Price Target Trend (3-Month): Up-Flat +4.69%
Signal Timeframe: Quarterly-Monthly-Weekly
Trend Bias: Up-Down / Long-Medium
Focus: Capital Growth
Set up Notes:
• NVL looks like it is entering a new long-term uptrend here after the 50% pullback from record highs completed a few months ago, and is now rallying on strong fundamentals and forecasting.
• Robust performance in 2015 and 2016 lead to an enormous rise in value, before a softer 2018 brought pricing sharply lower - but growth has returned strongly in 2019 across sales, margins and profits, and is expected to continue to 2022.
• Pricing broke free of the major downtrend early in 2019 before working through resistance levels layered up to $2.00, and after a break, spike and retest of support at this level, pricing has moved forward with good momentum shown here.
Support ($): 2.50, 2.25, 2.00, 1.90 & 1.80.
Resistance ($): 2.75, 2.80, 3.00, 3.20 & clear.
Growth Focus: NATIONAL VETERINARY CARE LTD (NVL)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
It can be a winning strategy to use patience and wait for a growth stock to go through a corrective cycle to get a better value entry, and we may have that right here with National Veterinary Care Ltd. The price of this pet services specialist is now emerging from an 18-month down-cycle, coming out of the doghouse with fresh strength, and signalling that a new uptrend might be about to be unleashed.
A fairly recent addition to the ASX, coming onto the boards mid-2015, and already showing some strong success in the veterinary health services sector, operating through self-run clinics and training centres as well as administration and management services throughout Australia and New Zealand. The company is growing organically but also aggressively though acquisition, reporting 32 additions in recent results, but they yet remain minority players within a greatly fractured market, and the acquisition strategy remains active.
Performance has been very strong with revenue gains of more than 43%, earnings up over 37%, driving profit growth of nearly 29% in the last year. This trend is set to stay strong out to 2022 with excellent forecasting seeing growth to continue across sales, earnings and profits while also seeing margins increasing. This outlook couples well with strong majority positive analyst sentiment showing a current discount of nearly 15% to consensus targets, with those aggregate targets rising almost 5% higher still in the last 3 months alone.
Price seems destined to chase old highs soon, with linear resistance breaking in June and fresh signs that a new uptrend could be beginning here with excellent momentum in the longer-termed timeframes. There could easily be some volatility here with the stock sitting right around important resistance structure at $2.50, though we see excellent support layered down from $2.40 to $2.20, with major structure at $2.00. There is a new short-term cycle coming up and we would be looking to buy the dips in the short-term.
A little bit of dividend yield doesn’t hurt but there is plenty of growth story to follow with NVL (though a liquidity warning does apply due to low average volumes) but we do like the strong forecasting combining nicely here with healthy historical performance, and the longer-term pricing picture showing technical setup that looks very fetching indeed.