FTSE 250 incumbent
Pets at Home is the UK’s leading pet care business. With over 450 locations throughout the UK, it provides pet owners everything they need to look after their pets. This can range from food to toys and bedding, as well grooming and veterinary services.
As I write, shares in Pets at Home are trading for 462p. Twelve months ago, shares were trading for 405p, which is a 12% return. Despite share prices rising to an all-time high recently, the past few months have seen the share price cheapen — but more on that later. I believe now could be an opportunity to add cheap shares to my portfolio.
Why I like Pets at Home Group
Profile and offering. Many of my best stocks to buy now have competitive advantages in their sector. One of these is having the size, profile, and offering to see off competitors and be the go-to name in their industry. Pets at Home ticks this box for me.
Consistent performance. Pets at Home has been performing consistently for a while now. I see revenue and profit has increased year on year for the past four years. I am aware that past performance is not a guarantee of the future but I use it as a gauge. Recent Q1 results were impressive too. Retail and veterinary service revenues increased by 29.1% and 44.7% respectively compared to pre-pandemic levels. In addition to this, its VIP programme membership numbers saw an increase of 6.6%. The encouraging figures meant management upgraded its profit forecast for the full year to approximately £130m meaning, if achieved, this would be close to 50% higher than last year. Most of my best stocks to buy now have a good track record of performance.
Increasing demand for services. According to Statista, more than half of UK households own at least one pet in 2021. Consumer spending has increased in line with the rising population in the UK too. Spending in 2020 reached £8bn compared to £2bn in 2005. In 2020, £4bn of this £8bn spending was on veterinary services alone. Pets at Home is well placed to benefit from this increased demand and spending.
The best stocks to buy now have risks too
Firstly, competition is increasing in the pet sector and there are many other players attempting to take up market share. Pets at Home is the UK’s leading retailer currently and I don’t see that changing for the foreseeable future due to its size. Dwindling market share could affect performance and investor sentiment, however.
Next, the recent haulage crisis and Brexit pressure will affect the supply chain for Pets at Home. Many retailers across different industries are facing similar issues. This could affect performance and financials as well.
Overall, I believe Pets at Home is one of the best stocks to buy now for my portfolio. With £1,000 to invest in shares right now I would happily choose Pets at Home shares.
Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.