Are National Veterinary Care shares in the buy zone?

After a disappointing 2018, shares in pet care company National Veterinary Care Ltd (ASX: NVL) have been making a comeback over the last few months. Is now the time to buy?

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With the National Veterinary Care Ltd (ASX: NVL) share price rallying more than 60% since January, is it time to put the Aussie pet care company's shares in the buy basket? Here's a closer look at how the company has fared over the past year and what might be in store for FY20.

National Veterinary Care's recent performance

Last year was a frustrating one for shareholders in National Veterinary Care. The pet care company's share price had surged to a new all-time high in early January, even breaking through the $3 ceiling for the first time in its history. But that was about the end of the good news. Loyal shareholders watched in dismay as the value of their holdings dwindled away over the following 12 months. By January 2019, the share price had halved, hitting a multi-year low of just $1.58.

Investors may have been frustrated that National Veterinary Care's strategy of growth through acquisitions wasn't driving an even greater uplift in revenues. Despite the company announcing that revenues had increased by 26% for the year ended 30 June 2018, National Veterinary Care's share price continued to plunge over the second half of 2018.

But more recently, things have started to turn back in the company's favour. Since bottoming out in January, National Veterinary Care's share price has jumped by almost 60% to $2.52 at the time of writing. Contributing to the resurgence in National Veterinary Care's share price could be the fact that its key competitor, Greencross Limited, was bought out by private equity firm TPG Asia in February and was subsequently de-listed from the ASX. That meant that average investors who still wished to gain some exposure to the pet care industry in Australia may have decided to pick up shares in National Veterinary Care.

And it's easy to see why investors would want to be invested in the pet care industry. According to the RSPCA, Australia has one of the highest rates of pet ownership in the world, with around 62% of households owning a pet.

For its part, National Veterinary Care has rewarded those investors who migrated over from Greencross by delivering strong financial results. On a difficult trading day for the ASX, shares in NVL leapt 4% higher on Monday after the company released its FY19 annual report to the market. This time around, revenues jumped 43.6% higher, year-on-year, to $118.4 million, boosted by 32 acquisitions that the company had made over the prior 12 months. Statutory net profit after tax was also up 28.9% to $8 million.

Is it time to buy?

I think that National Veterinary Care offers a great buying opportunity at current prices. Through its acquisition strategy, NVL has rapidly accelerated its revenue growth, expanded its market share and cemented its position in New Zealand. And given that it is no longer fighting with Greencross for the attention of investors, the time is ripe for it to break through that $3 ceiling again.

Motley Fool contributor Rhys Brock owns shares of NATVETCARE FPO. 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 Scott Phillips.

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