Shares of Greencross Limited (ASX: GXL) have continued their decline today, plunging a further 28 cents or 3.3% to be changing hands for just $8.22. That reflects a 23.7% drop since the shares peaked at a record $10.78 high back in August.
Greencross is a provider of veterinary services and pet care retail with an estimated 7.5% share of the Australian market. After having completed a merger with Mammoth Pet Holdings and acquiring City Farmers, the company is striving to achieve 20% dominance over the local market in the coming years.
There are two likely reasons why the stock may have pulled back in recent months. Firstly, the company reported that sales from its recently-acquired City Farmers business had been slightly below expectations so far in FY15, which will certainly disappoint investors after Greencross paid $205 million for the business.
Secondly, profit-taking could also be on the cards. The company's shares were trading for just 66 cents at the beginning of 2011, reflecting an incredible 1,533% return between then and their August all-time high. Investors content with their profits may simply be locking in some of their gains.
At today's price, Greencross is presenting as a compelling 'Buy' opportunity. With a market capitalisation of $947 million, the stock is trading on a forecast P/E ratio of 22.1x future earnings which seems more than justifiable considering its growth prospects in the years ahead.
