VCA Antech Inc.WOOF

Morningstar Rating

Stock Research and Analysis

by Debbie S. Wang

A "tail"-blazer in its field, VCA Antech makes pet health care an attractive opportunity for human investors with an eye toward the longer term, in our view. But pet health-care spending is under pressure in the near term as overarching economic conditions Read more

Bulls Say

As specialization develops in pet health care, more opportunities arise to sell higher-margin services in ophthalmology, dermatology, dentistry, oncology, and cardiology.

Diagnostic lab tests have become a key, high-margin product that animal hospitals rely on to enhance profitability. This bodes well for VCA Antech's laboratory business.

Unlike in human health care, malpractice suits in vet care are rare. Furthermore, bad-debt expense is kept below 1% of sales, much better than the 8%-9% typically seen at human hospitals.

With about 22,000 independent animal hospitals in the United States, there's plenty of room for VCA to grow in this highly fragmented market. Read more

Bears Say

VCA Antech relies on acquisitions of animal hospitals to maintain its growth rate. If operating cash flow declines, the firm may be tempted to assume more debt to continue funding purchases, which could limit financial flexibility.

Veterinary practices are local in nature and gain clients through convenience of location, word of mouth, and reputation. VCA's identity as a large chain operator may turn off independent clinicians.

Because VCA depends on acquiring more vet practices for its growth, it is reluctant to provide aggressive marketing support for its existing hospitals, in the event those practices might alienate locally owned animal hospitals that could eventually be purchased by VCA.

VCA's recent foray into digital radiography may not pay off for a while, as veterinary hospitals remain reluctant to take on substantial capital spending in current economic climate.

Strategy

VCA Antech follows a two-pronged strategy as its industry begins to consolidate. For the hospital business, the firm seeks to acquire 20-30 medium-to-large animal hospitals each year. For its diagnostic Read more

Management

We give VCA Antech middling marks for corporate stewardship. Robert Antin has been CEO, president, and chairman since he founded the company in 1986 with his brother, Arthur Antin, who remains COO. Both brothers were previously involved with AlternaCare, Read more

Profile

Founded in 1986, VCA Antech is the largest operator of freestanding, full-service animal hospitals and veterinary diagnostic labs in the U.S. With about 482 pet hospitals Read more

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