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Up 22% in 2017, is the National Veterinary Care Ltd share price a buy?

The National Veterinary Care Ltd (ASX: NVL) share price has grown by 22% in 2017, it could be one of the best small caps to own. As investors, we’re always looking out for the next great investment. It’s unlikely to come from the large cap space because they’re already known by the market.

The best new ideas are likely going to come from newly-listed shares or smaller businesses, preferably both.

National Veterinary Care could be one of the best small caps to own over the next few years for the following reasons:

Defensive industry

Pets are a very important part of a lot of households. To some, a cat or a dog is a furry child. Pet owners would do almost whatever it takes to look after their pet whether the economy is going great or not.

You could almost think of vet clinics as private hospitals for pets.

Potential growth

National Vet Care is a fairly new entity having only been listed since August 2015. It started with minimal clinics and has now grown its total number to 55 with its latest acquisitions.

The share price has grown by 117% since it listed, but I think there could be a lot more to come.

At 31 December 2016 Greencross Limited (ASX: GXL) had 169 clinics, with plenty of room to grow. National Vet Care could easily grow its network in the medium term to at least two thirds of the Greencross total, which would be around 110 – double the current amount.

This potential growth should not only grow revenue nicely, but economies of scale efficiencies should start to be seen whilst the business gets bigger.

No retail business

Greencross has a great strategy of co-locating vets inside its retail businesses which should boost profitability and the new rewards system should encourage customers to use both services.

However, it is quite conceivable to imagine internet shopping may offer a competitor to Petbarn at some point in the future which could hurt its market share and/or profit margins for Greencross.

National Vet Care doesn’t face this problem as management have committed to staying as a veterinary-only business to truly take advantage of the growth of the pet market without the risk of retail.

Foolish takeaway

I think National Veterinary Care could provide shareholders with a lot of capital growth over the next few years at the current price as it expands its network. It’s currently trading at 26x FY17’s estimated earnings and doesn’t currently pay a dividend, however management expect to commence a dividend at its annual results later this year.

This isn't the only great opportunity on the market, you should check out these growth shares that could also smash the market.

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Motley Fool contributor Tristan Harrison owns shares of Greencross Limited and NATVETCARE FPO. The Motley Fool Australia owns shares of Greencross Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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