CVS Group Plc (LON: CVSG) share price plunged 10.3% despite the company reporting excellent earnings during the first four months of its current fiscal year yesterday.
The pet veterinarian group benefitted immensely from the rising demand for pets driven by the coronavirus pandemic lockdown.
CVS Group reported that its sales rose 13.8% during the four months to 31 October, while like-for-like sales grew 12.4%. The company’s profit margins increased to 19.2% compared to last year’s 18.7%.
The company reported a surging number of vacancies as it struggles to hire new vets for its clinic to meet the rising demand for its services.
The vet group revealed that it is on the lookout for new acquisition targets within Europe and is open to entering new markets, given the fragmented nature of the European markets.
It seems investors are conscious of the growing challenge of recruiting qualified vets and the rising wages in the UK, which are two industry-wide issues that the company has to deal with.
CVS Group has in the past taken measures to control its wage costs, but there is only so much a company can do in an industry with a shortage of qualified vets, which allows the existing vets to charge more for their services.
Concerns have also been raised about the company’s rich valuation, which could explain the recent downtrend. In addition, the company might struggle to maintain its current growth level given the tightening conditions in the veterinary industry.
Still, CVS Group is a company I would bet on despite its recent pullback. Value-oriented investors may also find the current prices quite attractive.
*This is not investment advice. Always do your due diligence before making investment decisions.
CVS Group share price.
CVS Group share price fell 10.3% to trade at 2141.50p, falling from Wednesday’s closing price of 2387.50p.
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