Looking to get seriously rich in this new decade? Of course you are. The booming pet care market is a hot trend you should definitely look to capitalise on this decade. It’s what I’ve done in recent days. And in particular, the veterinary medicine segment is one to watch in the years ahead.
According to a Fortune Business Insight report, the worldwide vet drugs market will surge to $27.6bn by 2025. This would represent an almost-$10bn jump in a mere eight years. It also suggests a healthy compound annual growth rate of 5.6%. And it’s a market which Animalcare Group (LSE: ANCR) is well placed to capitalise on.
Moving back into growth?
This AIM-quoted business develops, supplies and markets various products and services to vets across the world. Trading here hasn’t been that strong of late, sure. Sales fell 1.5% in 2019, it said last week, because of supply-side issues and falling use of antibiotics for livestock.
However, the launch of new products recently should help it recover. Animalcare cut the ribbon on four new drugs last year alone, and hopes to receive regulatory sign off on another in 2020. It also plans to submit a pain-relieving treatment for approval this quarter.
City analysts expect Animalcare to bounce back into the black with a 2% earnings rise this year. And predictions of improving momentum lead to expectations of a 6% bottom-line increase in 2021.
Balance sheet betterment
The huge improvement Animalcare is making to its balance sheet bodes well for the future too. Underlying cash conversion rose to 92.3% in the first half of 2019, up from 80% the year before. And the business confirmed last month it expects to report a “significant improvement” in the rate when full-year results come out on 31 March.
Thanks to this exceptional cash conversion net debt is toppling too. This fell by around a third year-on-year in 2019 to £15.9m, Animalcare has said. This further bolsters the company’s financial firepower when it comes to investing in R&D to drive future growth.
Now Animalcare isn’t exactly cheap. Not on paper at least. At current prices it carries a forward P/E ratio of 16.2 times. Such a reading may put off many stock pickers given the supply-related issues it’s had of late too.
I consider this reading to be quite undemanding though, when you consider the company’s immense structural opportunities in the next decade and beyond. Besides, those supply problems it experienced with third-party manufacturers last year are a thing of the past.
In fact, the petcare specialist still trades at a considerable discount to some of its industry rivals on the back of these previous troubles. Fellow drugmaker Dechra Pharmaceuticals for instance trades on a forward P/E multiple of above 30 times. Those looking for solid growth prospects at great value need to give Animalcare some close attention today.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK 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.