Why Greencross Limited and National Veterinary Care Ltd could be in trouble

I have often written about how I believe that Greencross Limited (ASX: GXL) and National Veterinary Care Ltd (ASX: NVL) are two good prospects on the ASX.

I still believe that to be the case. There are good fundamentals which should drive both stocks higher over the long-term.

Around three quarters of dogs and two thirds of cats go to the vet each year, which provides a good source of recurring revenue. The number of pets is increasing with the human population. We are spending more on pets due to ‘humanisation’. Both businesses are growing their veterinary clinic networks.

However, just because there’s a good tailwind for a business doesn’t mean it will translate to solid growth year after year.

I recently read an article on the Australian Daily Telegraph website about the emerging Aussie entrepreneurs in 2018, in partnership with the Telstra Corporation Ltd (ASX: TLS) Business Awards.

The first business caught my eye, it’s called Vets On Call. According to the article it aims to be the Uber of vets. It aims to bring veterinary services to pet owners, which should be a more convenient arrangement for pet owners.

Vets On Call has a compelling sales pitch, offering better flexibility and also saves time for the owner due to not needing to travel to the vet. It also means the pet may benefit by having a lot less stress from the trip and indeed at the vet itself.

Of course, a couple of vets driving around wouldn’t be big competition for Greencross or National Vet Care. The business model of most vets is to get the clients to come to them. That’s why Greencross is investing so heavily in its co-location strategy and why National Vet Care is spending millions on acquisitions. A mobile vet service could negate those strategies somewhat.

Foolish takeaway

There’s no guarantee Vets On Call will take off. I can’t imagine a vet would want to spend most of their time driving, instead of seeing pets. But, it speaks of the disruption that the pet industry could face. Perhaps Greencross and National Vet Care could acquire the competition or start their own service, before it’s too late.

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Motley Fool contributor Tristan Harrison owns shares of Greencross Limited and NATVETCARE FPO. The Motley Fool Australia owns shares of and has recommended Greencross Limited and Telstra Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. 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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