The National Veterinary Care Ltd (ASX: NVL) share price has grown by 24% over the past year. I think there's a lot more growth come for the following reasons:
Acquisitions
National Vet Care's key route to growth is more veterinary clinics.
It acquired 14 clinics during FY17 and there are a number of potential targets in the pipeline.
National Vet Care could go on to grow its total clinic number up to 150, 200 or even more. There is plenty of growth left for the business.
Increasing margins
As the business gets bigger its profit margins naturally get bigger as its economies of scale comes into play.
During FY17 it grew its underlying earnings before interest, tax, depreciation and amortisation margin from 17.4% to 18.1%. This could grow further as the years go by, accelerating growth.
Pet population growth
The Australian pet population is steadily growing alongside the human population.
This growth is causing a boom in the pet industry and adding significant revenue potential for both National Vet Care and Greencross Limited (ASX: GXL).
If people continue to treat their pets as furry children then veterinary clinics should be a good growth industry.
Foolish takeaway
National Vet Care is currently trading at 32x FY17's earnings with a grossed-up dividend yield of 1.6%. Management expect statutory revenue growth to be in the region of 25%, which means National Vet Care could have another good year. I think it's a buy at the current price.
