Reporting season is over and now we get to pick through the pieces to see if there are any opportunities.
Although there wasn't a strong reaction to the National Veterinary Care Ltd (ASX: NVL) report on the day, it had already warned that the result would be somewhat disappointing and the share price had fallen.
Whilst there was a solid improvement of revenue by 26% to $84.2 million and 25.6% growth of statutory earnings per share (EPS) to 10.63 cents in the report, the decline of the underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin from 18.1% to 15.9% was a drag on the result.
However, the 2.51% GP organic revenue growth, 76% growth of pet membership, 20% growth of the management services division and the expanding network of vet clinics were all pleasing factors in FY18 and points to a better FY19.
Indeed, management said that in July 2018 organic growth was 2.5%. Plus, management guided that revenue would be 25% higher in FY19 and that the EBITDA margin would stabilise.
This is all positive, particularly with the company announcing another acquisition earlier this week. The new acquisition is based in New South Wales and is expected to settle by the end of October 2018.
According to National Vet Care, the acquisition generates annual revenue of $1.6 million and annual earnings before interest and tax (EBIT) of $0.45 million – an impressive margin when you consider National Vet Care's overall underlying EBITDA margin was 15.9% in FY18.
The total cost of this acquisition is $2.25 million, including a deferred component of $0.45 million subject to earnout conditions.
Once this acquisition is integrated the company will have a total of 68 clinics across its network.
Foolish takeaway
I think that the beaten-down share price of National Vet Care represents a decent opportunity to buy into this growing business. A roll-up strategy isn't the most attractive thesis out there, but the company's bottom line continues to grow.
It can easily grow to 100, 125 or perhaps more clinics in the medium-term as long as it can find the right targets.
It's trading at roughly 20x FY19's estimated earnings, which I think is a pretty good price for this growing business.
