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Stock of the Week: MWI Veterinary Supply

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November 25, 2013 – Comments (0) | RELATED TICKERS: MWIV

MWI Veterinary Supply (MWIV) is a company I’ve followed off and on for the last 3 years or so. The stock is up more than 600% over the last five years and I still think it’s got plenty of room to run. This is definitely one to keep in mind:

*What does it do? MWIV distributes animal health products to vets in the US and UK;

*Products they sell include pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, supplies, specialty products, veterinary pet food, capital equipment and nutritional products;

*The company has grown sales at 23% annualized rate last 5 years, net income 26%;

*CEO James Cleary been with the company since 1998, he’s been the CEO since 2002 and he’s also president of American Veterinary Distributors Association;

*The company markets these products to veterinarians in both the companion animal and production animal markets; 

*Approximately 97% of product sales come from consumable medicines and supplies commonly required by veterinarians in their practice resulting in a recurring stream of revenues;

*MWI has long established relationships with customers. Example: the company has supplied Banfield, the largest private vet practice in the US for 16 years now; other key vendors are 10 years and longer;

*According to the American Veterinary Medical Association, the US market for veterinary services is highly fragmented with more than 52,000 veterinarians practicing at the end of 2012;

*It’s estimated that there are over 22,000 companion animal hospitals operating at the end of 2012;

*Sales breakdown (agency included): US and UK is basically 64% companion animals, 36% production animals;

*From the 10-K: “In addition, we sell approximately 800 products in the United States under agency agreements with our vendors. Under an agency agreement, we typically solicit orders and provide customer service for a commission, while the vendor stocks and ships the products.”;

*The stock trades at ~31 times full year 2014 estimates. It’s also worth noting that expectations at the beginning of last year were EPS of $4.66-$4.80 and the actual deliverable was $4.95;

*In the five years to 2018, the pet population is forecast to grow at about 2.1% annually;

*Recent acquisition of IVESCO is expected to add $400 million in annual revenue, will own for 11 months of fiscal 2014;

*Click here to visit the company’s website: https://www.mwivet.com/default.aspx

*Click here to see a recent investor presentation: http://files.shareholder.com/downloads/MWI/2804193094x0x706070/cff08d8e-1afd-4241-9cc2-bbfec056260e/MWI_Veterinary_Supply_2014%20-%20Credit%20Suisse%20-%2011-12-13.pdf

MWIV is still pretty much a small cap at a market cap of $2.25 billion but given the growth it has witnessed over the last five years my initial reaction is that this has helped the company strengthen its competitive position in the market. I’m making a Caps call today giving it the green thumb.

Foolish best,

Jason

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