The Greencross Limited (ASX: GXL) share price is down by 20% since the start of 2017.
I think Greencross is a very attractive business with a lot of reasons to like it. Here are just three of the reasons to consider buying shares:
Growing market
The pet market is one of the fastest growing conventional industries in Australia. It is estimated that since 2013 the pet market has grown by 42% to $12 billion.
There are two driving forces for this in my opinion. The first is that the number of households with a pet has grown to 62%, with a total of 3.8 million cats and 4.8 million dogs. As the human population grows the pet population should keep growing too.
The second reason for the growth is the humanisation of pets. We are much more willing to spend money on our furry children. Toys, vet visits, pet insurance and gourmet food are just some of the areas that have seen increased spending.
Around two thirds of cats and three quarters of dogs visit the vet every year.
Co-location strategy
Greencross is trying to capture this growing market by cross-selling both its vet and retail offering in the same building. It's doing this by co-locating a Greencross vet inside Petbarns.
Not only is this a great strategy for revenue, it also means the businesses are sharing overheads. An added bonus is that the set-up costs are a lot cheaper than acquiring an existing vet.
Consistent, growing results
Greencross has been posting impressively consistent growth results for a number of years.
In its half-year result to 31 December 2016 it revealed that earnings per share grew by 15% and the dividend grew by 6%.
Greencross has grown its dividend every year since it first started paying a dividend back in 2009.
Risks
The major risk is from competitors. Amazon and other online retailers could make a dent in Petbarn's sales and margins. As long as Greencross can maintain its market share and grow online sales then it should be okay for the medium-term.
Another risk is the fast-growing National Veterinary Care Ltd (ASX: NVL). However, I think the pet market is big enough for both businesses to thoroughly succeed.
Foolish takeaway
Greencross is currently trading at 13x FY17's estimated earnings with a grossed-up dividend yield of 4.96%. I think the current price offers investors a really appealing entry price for this growing business.
