Author Topic: CVET - Covetrus  (Read 1632 times)

Broeb22

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CVET - Covetrus
« on: August 14, 2019, 08:33:31 AM »
I guess I'll go ahead and start a new idea given my conversation with Spek on the "What are you buying thread".

What are folks' opinion on this business after its recent drop?

From my post in the other thread:
"Based on my analysis, which I am quite certain you won't rely on, CVET offers a superior value proposition to its customers, vets. It does so by offering lower inventory carrying costs and bringing the vet practice incremental sales they otherwise would not earn. Vets currently charge exorbitant prices for their prescriptions because much of the inventory moves slow at the individual practice level, but a company like CVET can aggregate the demand of its vets, generate better inventory turns at lower gross margins, and still earn a respectable ROE. The lower gross margin CVET can charge relative to the individual practice is what drives the sales boost for the vet practice.

The prescription mgmt. side of CVET is more than anything a means to drive higher sales from the distribution business. The existing distribution business and its sales reps should also drive the adoption of CVET's prescription mgmt. business internationally, which the company is building its capabilities for right now.

Yes, the debt is very high. That is an admitted risk for a small position, and one I offset at the portfolio level with a decent amount of cash. 

I guess when you boil it down, I believe CVET will earn above-market growth due to the better value prop outlined above, will get some additional gravy from their software-type business, and they operate in a market that grows above inflation with a multi-decade record of doing so.  "


rogermunibond

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Re: CVET - Covetrus
« Reply #1 on: August 14, 2019, 08:57:27 AM »
Chewy, Petmeds, WalmartPetRx all have much lower prices than vets.  Not sure how CVET overcomes that.

lnofeisone

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Re: CVET - Covetrus
« Reply #2 on: October 23, 2019, 03:24:28 AM »
Chewy, Petmeds, WalmartPetRx all have much lower prices than vets.  Not sure how CVET overcomes that.

I think this one is starting to get a bit more interesting given the price. If I have time this weekend, I'll try to do a full write-up of my thoughts though I'm still figuring out how to best price it.

@Roger -  the prices offered by Chewy, Petmeds, etc. are for consumers that have time on their side and the medication is general purpose, i.e., time insensitive but price sensitive. For example, getting something like Heartgard which is due monthly is easy and not where CVET plays. CVET overcomes other problems like:

1) Helping vets cary inventory of medications that only vets can administer (e.g., here is a list of FDA approved pet meds and a lot of these can't be found on Chewy, Petmeds, etc. https://animaldrugsatfda.fda.gov/adafda/app/search/public/tradeSponsorPdfByNadaAnada/Section12byApplicationNumber). 

2) Manage medications needed on demand. Pets have emergencies or surgeries and waiting for medication to arrive from Chewy is simply not an option.

2) Getting meds when there is a shortage (e.g., antibiotics about a year ago). This doesn't happen very often but whenever I encountered this, vets had the medications while pharmacies didn't.

This is just one of the few lines of business CVET has. Others help vet set up, grown, and manage practices which is tedious and probably not what they want to do with their time (e.g., OSHA, rent negotiations, billing, etc.). I suspect once the vet embeds CVET's software into their practice they are not likely to switch because of the disruptions to the practice, cost, and general headache of transition. There are also opportunities to add new solutions. The question is can CVET monetize all this and make a profit.  ;D