Protection from Greece worries in Emerging Growth Stocks away from the Euro zone, PetMed Express (NASDAQ: PETS), Dynamic Materials (NASDAQ: BOOM)
Greece survived another round of financing by raising enough funds to cover an E5bln Treasury bill that matured this week. The European Central Bank’s decision to halt additional funding to Greece’s financial institutions will ultimately weaken the country as these banks have been the main buyers of the country’s debt. The banks are effectively keeping the country from falling into bankruptcy by purchasing the country’s debt offerings as many simply do not want to take the risk. The country is now trying to obtain an E31.5bln loan payment as uncertainty looms as to whether Greece can remain part of the Euro.
According to the latest IMF report, Greece’s debt problem is expected to rise to nearly 190% of GDP next year. Their return to the private markets for funding seems improbable as there is no clear cut growth strategy in place with protest growing over austerity measures every week. Most expect the situation to deteriorate further before it gets better, which will cause volatility in the global financial markets. There are some growth companies with sales not dependent on Greece and Euro zone that appear to be cheap at these levels as valuation is becoming very compelling. Seventy percent of the market falls when the indexes drop, making those companies clear of the Euro zone a very attractive investment.
Petmed Express (NASDAQ: PETS), based in Pompano Beach, Florida, is America’s largest pet pharmacy, marketing prescription and non-prescription pet medications and products. The market for pet prescriptions grows everyday as Americans now house around 163 million dogs and cats. The company has plenty of room for growth and it only holds about 5% market share of the $3.2 billion a year industry. According to management, the company will focus on advertising efficiency and shifting sales to higher-margin items, including generics, while continuing to expand product offerings.
Sales were relatively flat during the quarter, but total orders increased by 5.5%, and reorder sales increased by 2.1%. The company’s current stock price is around $11.00, and has a 52-week range of $8.91 to $14.03. Petmed offers its investors a healthy dividend yield of 5.75% and is trading close to its 52-week low, a great point of entry. The industry is expected to grow as the American Pet Products Association 2011-2012 National Pet Owners Survey revealed that pet ownership has been trending higher for years, with 39% of households owning a dog, and 33% owning a cat. Repeat customers and new sales should bolster the company’s stock price.
Dynamic Materials Corp (NASDAQ: BOOM), based in Boulder, Colorado, operates in three segments, explosive metalworking, oilfield products and AMK Welding ships. Most of the company’s customers are in America, but about 15% of its plates and services are sold in Canada and Russia. Third quarter gross margin increased to 31% which was higher than the forecast of 29%. The increase primarily resulted from a more favorable product mix and stronger pricing environment. For the fourth quarter, sales should improve sequentially from the third quarter, but are expected to be 3% to 5% below 2011 fourth quarter sales of $54.3 million. Gross margin is expected to improve to approximately 29% from 27% in the fourth quarter last year.
With oil and gas drilling activity in the United States and around the globe trending higher has created huge demand for durable infrastructure. The company is currently trading around $13.50 and has a 52-week range of $12.18 to $24.53. The company has a market capitalization of $180 million and pays shareholders a dividend yield of 1.2%, making Dynamic an attractive growth opportunity.