Greencross Limited (ASX: GXL), the provider of veterinary services in Australia, is one of the greatest growth stories to have come from the ASX in recent years. After it traded at just 60c per share at the beginning of 2011, it skyrocketed nearly 1,700% to a high of $10.78 in August this year.
However, a market-wide sell-off has seen the shares retreat to $9.59, giving investors cause to think now may be a great opportunity to buy. Here's why they might be right…
Greencross operates in a quickly growing industry and is set to continue benefiting as household pets become more and more a part of the typical Australian family. For instance, dogs are increasingly going from the kennel to the couch and owners are thus willing to pay more for the care of their loved ones.
While Greencross already controls roughly 7.5% of the Australian market (thanks in part to its recent acquisition of pet retailer City Farmers), it has strong ambitions to increase that market dominance to 20%. As it continues to acquire small businesses and veterinary practices, it could well achieve that target in the coming years.
Buy, Hold, or Sell?
Although some investors would be deterred by the stock's high valuation (it trades on a P/E ratio of 29.8x) and its low dividend yield (currently just 1.3%, fully franked), I believe investors who buy today could be rewarded in capital gains over the coming years as the company continues to expand.