An Earnings Overreaction in PetMed Express? (PETS)

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PetMed Express Inc. (NASDAQ: PETS) is far from your usual company.  The company specializes in online drug orders for your pets and it is arguable enough that the company could eventually be considered a potential takeover candidate.  The market cap after a large drop on Monday is now only $219 million.

The company beat earnings on the surface for the latest quarter as net income was $4 million, or $0.20 EPS, versus $4.1 million, or $0.19 EPS.  The report shows that earnings per share was up while net income fell due to there being fewer shares on the market compared to a year ago. Revenue rose to $55.9 million from $50.9 million a year ago.

PetMed Express acquired about 162,000 new customers during the fourth quarter compared to 130,000 during the same period a year ago.  That 25% increase allowed for the company to end its last fiscal year with a total yearly gain of approximately 722,000 customers compared to 645,000 for the year earlier.  Online sales rose by 16% for the quarter and were up by 8% for the year ended March 31, 2012.

A higher operating cost bit into earnings in part due to advertising expenses.  Shares are down by 19% at $11.12 against a 52-week range of $8.51 to $14.77.  If the company can manage to hit its consensus earnings targets then this site trades at just over 14-times is new adjusted share price.

Any time you see a move like this it is hard to wonder if you are not seeing a large overreaction on that particular day.