The Greencross Limited (ASX: GXL) share price has grown by 10.9% over the last three months and could keep rising over the months to come.
There is a lot to like about Greencross and here are three reasons why I think it could be worth a place in your portfolio:
Cross-selling
Greencross is the owner of several pet businesses including Greencross Vets, Petbarn and City Farmers. Each of these businesses are good on their own, but Greencross has a plan to really maximise the potential of each one.
It is steadily co-locating vets inside Petbarns which has the powerful effect of each business being able to refer to the other. This tactic is so successful that Greencross is ramping up the changes.
Cheap vet expansion
When Greencross was first expanding it was acquiring other vets for a fairly substantial figure, usually more than $1.2 million.
However, it has a lot of potential with a large retail network of stores just waiting to be integrated with vets to expand on a more cost effective basis. Greencross disclosed recently that capital expenditure is around $0.5 million to $0.7 million when building a vet inside a Petbarn, roughly half the cost of acquiring a stand-alone vet.
This is an excellent method for Greencross to boost sales relatively cheaply over the years to come.
Growing market
Greencross aims to achieve roughly 20% of the pet market share and it has a great chance to do so as it expands the number of vets and pet retail outlets.
However, not only does Greencross want a bigger slice of the pet pie, but the overall pie is getting bigger. The number of pets in Australia is steadily growing alongside the human population which will be a large tailwind as Australia's population increases.
Risks
Greencross' pet retail business is fairly vulnerable to disruption from online-only offerings, but Greencross is rapidly growing its own online sales so hopefully this won't be a major problem.
National Veterinary Care Ltd (ASX: NVL) could provide a challenge to Greencross on a national scale, but I think there's enough pets in Australia for both to substantially succeed.
Foolish takeaway
Greencross is currently trading at 17.5x FY17's estimated earnings with a grossed-up dividend yield of 3.8%. This isn't a cheap growth stock or an income stock with a large yield, but is a good mixture of both.
I think Greencross could grow steadily over the coming years from the current share price of $7.14. For a growth stock with a grossed-up dividend yield of over 7.5% you should check out this stock instead.
