Why the Apiam Animal Health Ltd share price plunged 30% today

Unfortunately for its shareholders, the Apiam Animal Health Ltd (ASX: AHX) share price is not having a great end to the week.

At lunch its shares are down a massive 30% to 80 cents.

What happened?

This morning the veterinary products and services provider released its full-year guidance.

According to the release revenue is expected to be in the range of approximately $96 million and $98 million, with underlying EBITDA forecast to be between $7.2 million and $8.5 million.

While the high-end of its guidance will mean a solid improvement on its first-half performance, investors appear to be disappointed with increases in its cost base.

These are the result of an investment in systems and resources, which management believes are essential to its growth plans.

Furthermore, a small reduction in its gross margin is expected as a result of unfavourable changes in its business mix.

Should you buy the dip?

Today’s sell-off does look to be a bit of an overreaction in my opinion. But having said that, I still wouldn’t be a buyer at the current price.

A lot of the company’s future growth is expected to come from the successful integration of the Quirindi and AllStock businesses it acquired recently.

In light of this I would suggest investors hold off an investment until these acquisitions have integrated successfully and their synergies have been realised.

In the meantime I would suggest investors look at Greencross Limited (ASX: GXL) and National Veterinary Care Ltd (ASX: NVL). Both of these veterinary companies have extremely bright futures in my opinion.

Alternatively, you could avoid the sector altogether and look at an investment in these explosive shares instead. Their strong earnings growth and growing dividends make them buys in my opinion.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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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