In what proved to be a great day for the Australian sharemarket as a whole, Greencross Limited (ASX: GXL) was one of the strongest performers with its shares strengthening 8.5% to $7.00, representing a gain of 55 cents per share.
The gain can most likely be attributed to opportunistic buying. Since peaking at $10.78 in August last year, the stock has retreated more than 40% and hit a fresh 16-month low of $6.44 on Thursday.
Greencross is Australia's leading veterinary services provider, although it makes the vast majority of its revenues from retail stores thanks to its merger with Petbarn and acquisition of City Farmers. As it stands, the company controls an estimated 8% of the market, with a target of 20%, which it hopes to achieve by acquiring more businesses as part of its 'roll-up' strategy.
Of course, there are risks involved in such a strategy and some investors have become concerned with the size of its recent acquisitions, together with the price it could be forced to pay for future acquisitions. At the same time however, analysts' estimates suggest Greencross' strong growth could continue over the coming years (resulting in higher dividends along the way), which could more than justify its trailing price-earnings ratio of 21 times earnings.
