The National Veterinary Care Ltd (ASX: NVL) share price has risen by 2% so far today due to news of its settled acquisitions.
The company announced that it has settled the remaining two veterinary clinics of the four that it announced in December last year. The new clinics are established businesses in south east Queensland.
The acquisitions were primarily funded by debt. National Vet Care has acquired 11 clinics so far in FY18, with full-year revenue of $14.7 million and earnings before interest and tax (EBIT) of $3.1 million. The business now has a total of 64 veterinary clinics.
So what?
I think National Vet Care is the small cap most likely to deliver market-beating returns, even if it doesn't deliver the biggest return out of all the possible options.
The rollup strategy is a simple, but effective one. The business just needs to keep acquiring clinics at good prices, whilst keeping the balance sheet in good shape and implementing its best-of-practice processes.
The veterinary clinic industry is a great one to be invested in. The number of pets is growing, the willingness of pet owners to spend on their pets is growing and pet insurance utilisation is growing.
National Vet Care has consistent, defensive earnings because around two thirds of cats and three quarters of dogs go to the vet each year. Price increases should be a good boost to organic growth as well.
Foolish takeaway
Management predicted that statutory revenue will grow by at least 25% in FY18, which could be a major boost to earnings per share if margins stay the same or grow. I'd be happy to buy shares at today's price for a long-term hold.
