Research Report ►(comments)

PetSmart, Inc., founded in 1986, provides pet foods, medications, supplies, and accessories like collars, leashes, toys, carriers, and pet houses for dogs, cats, birds, reptiles, fish, and other small pets, sold online and at 1008 retail locations in the US. Many branches also offer veterinary care and dental care, grooming services, and animal training. Pet Smart's PetsHotel operates supervised boarding facilities for dogs and cats with temperature controlled rooms and suites, daily specialty treats, and scheduled play times. The company is headquartered in Phoenix, Arizona.

Investment Impacts (help)

USA Country Analysis ► (edit / improve) The United States (US) has a highly productive, capitalist economy and is the largest and most diverse market in the world. Currency: the US dollar (USD) has the potential to increase in value especially versus the Australian and Canadian dollar because of the significant potential of undervalued companies. Investor Survey: the economic environment is very favorable for long term economic growth due to high scores on economic freedom and economic diversity. Trade: China, Japan, Mexico, and Canada are the top US trading partners, while the leading export and import are electrical machinery and vehicles, respectively. Commodity: The US produces a significant amount of coal and wheat for use at home and as an export. However, the US consumes a larger amount of oil, which contributes to their trade deficit. SWOT Analysis: The leading US strength is its entrepreneurial culture, while the main weakness is high health care cost. Energy independence has the opportunity to propel growth, while the major threat is the housing crisis, which will lower growth. Trading Strategy: An undervalued currency, high investment flow potential and favorable business environment lead to a positive outlook for US investments, which will also benefit from positive international actions.

Commodity Investment Impact

Hogs Commodity Analysis ► (edit / improve) Hogs (pork) are a major source of protein around the world. Commodity: Hog is rated a Hold. Hog demanders have slight potential to increase in value, while there are no hog suppliers to have an accurate assessment of value. Investor Survey: Hog’s long term growth potential is unfavorable due to low scores on SWOT strengths, but high scores on SWOT opportunities. SWOT Analysis: Weakness: hogs have a health risk to overconsumption. Opportunity to grow: hogs have a potential to increase demand as world populations grow; Threats to growth: Swine flu could decrease demand for hogs. Trading Strategy: The commodity analysis hold rating indicates that hogs should stay the same price over the short term, whereas a moderately unfavorable investor survey means hogs may decrease in price over the long term.

Discretionary Industry Analysis ► (edit / improve)

Description: The consumer discretionary stocks include companies whose sales come from consumer discretionary income purchases. Discretionary income = gross income less taxes and necessities such as rent, mortgage and food. Read More.

Profit Analysis: The best way to profit from discretionary stock investments is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street on left side), and have high Main Street Common Sense investment ratings (see Main Street on right side). When an economic recovery occurs, discretionary stocks tend to outperform the general stock market, because consumers quickly resume spending on items they wanted, but resisted buying during tougher economic times. Eventually those investments become overvalued, because profits and stock prices increase past their fair values. In other words, the margin of safety becomes low or negative. During the last stages of an economic business cycle, just before a recession, it is best to sell discretionary stocks, because they are likely to decrease in price the fastest. Selling a stock investment is difficult to do properly. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments. As a general rule, the larger the investment potential (margin of safety), the safer the investment.

Trading Strategy: During economic recessions, consumers tend to cut back on discretionary expenses to save money. Less spending by consumers eventually decreases business revenue and stock prices. During economic recoveries, consumers have more discretionary income, so spending quickly increases. Higher spending increases business revenue and eventually increases stock prices. During long economic expansions, discretionary income increase, but at a slower pace than during the initial economic recovery stage.

¹ Investment potential (margin of safety) is a weighted average of the discounted cash flow (DCF), the enterprise value (EV) market multiple, and the Warren Buffett investment methods.
² The weighted average cost of capital (WACC) for the industry is a broad representation of the WACC for each individual company. A sub-industry WACC offers both stability and accuracy for each individual company.

SWOT Analysis - PetSmart ► Add Your Input Below

WACC Discount Rate Analysis - PetSmart ► Experiment with PETM's Analysis ►

Discounted Cash Flow Analysis - PetSmart ► Experiment with PETM's Analysis ►

Comparative Value Multiple Analysis - PetSmart ► Experiment with PETM's Analysis ►

Warren Buffett Intrinsic Value Analysis - PetSmart ► Experiment with PETM's Analysis ►

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