If there is a stock you did not want to own in the second half of last year, it was Pets At Home (LSE:PETS). Pets At Home was thumped in Q3, with the share price dropping from a high in October of 220p, to a low of about 167 this week. However, the stock has started to see some heavy buying activity in January. Is it time for another rise?

Pets At Home shares – too volatile for some?

Pets At Home has been a volatile one. It was down at around 158 only as far back as August. This was not helped by fund manager KKR off-loading £119 million worth of Pets At Home shares in October. KKR has been a holder of Pets At Home for some time, and still controls a hefty chunk of around 12% of the company. It periodically sells some of its holding onto the market, prompting the shares to slide quite considerably.

In addition concerns have remained about the strength of the company’s board and its debt levels.

However, analysts now seem quite bullish about the company. Seven of the analysts covering Pets At Home shares have listed it as a buy, with only one still in the sell category. Numis Securities has Pets At Home listed as a buy in November, as does Beaufort Securities and Shore Capital.

Not just a high street retailer

Pets At Home, as a UK high street retailer (the company specialises in goods and supplies for pets), was one of the stocks you would ordinarily expect might be punished by what we at The Armchair Trader feel could be a major trend in UK stocks this year, namely a decline in profits as consumers realise they don’t have as much money to spend in 2018 as they did in 2017.

However, potential investors should pay less attention to the Pets At Home superstores, and more to the growth of the company’s services businesses, particularly its grooming salons and veterinary businesses. In its update to investors in May 2017, it reported that income from its joint venture vet practices rose 24.6% to £47.1 million. This may be something to watch in its next set of figures.

Pets At Home originally listed in 2014 at 245p.

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9th January 2018
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