MWI Vet Supply Industry Healthy

With a growing sales force and ability to establish strong and expanding relationships with veterinarians and vendors, MWI Veterinary Supply, Inc. (MWIV - Analyst Report) is poised to continue benefiting from the positive industry dynamics of the animal health products market. The company has been completing more acquisitions to help maintain its strong growth outlook.

Positive industry dynamics support higher animal health product sales in the U.S. Most of the growth is driven by the expansion of the companion animal health products market. Although organic growth is still strong as the company penetrates new markets and further into existing markets, the company has been making additional acquisitions to help maintain its strong long-term growth outlook. Its latest acquisition was AAHA MARKETLink on July 15.

The growth in selling, general & administrative expenses can place some downward pressure on earnings growth. This growth is driven by the incremental costs such as contract labor and occupancy cost associated with the expansion or opening of new distribution centers. MWI’s growth is also at risk from the high concentration of purchases from key vendors and competition in the veterinary distribution services market.

At its current price of $35.65 per share, MWIV is trading at roughly 19x fiscal 2009 EPS estimate of $1.91, which is at a premium to the group average multiple of roughly 18x. We believe the stock should continue to trade at a premium to the 1.1x group average P/E/G. Our price target moves to $39, or roughly 20x 2009 EPS.

Read the full analyst report on MWIV