don’t confuse the reliability of CVS’s earnings with the safety of its share price

In the six months to December, customer registrations and Healthy Pet Club scheme memberships rose nicely and average spending per customer rose, while the vet vacancy rate came down slightly to an average of 7.5pc. As a result, revenues and profits advanced smartly, the operating margin recovered to 7.5pc and debt came rattling down.

CVS has practices in Britain, Ireland and the Netherlands and those nations’ love affair with their pets, perhaps stronger now than ever after the thick end of a year in lockdown, shows no sign of abating. Spending on the care of companion animals is surely going to remain a priority for loyal owners, whatever the economy does.

All of that forms the basis for a solid investment case but investors must be careful not to mistake reliability of earnings for safety of share price. This column committed such a blunder when it first assessed CVS in a positive way when the shares traded north of £10, only to see them collapse to barely 400p.

Thankfully, we did not lose our nerve but very high multiples of forecast earnings suggest that sentiment has swung from rank pessimism to optimism once more and that leaves much less margin for any unexpected error or disappointment.

CVS is a good company in a good market but the rating now looks very full. Time to move on.

Questor says: sell

Ticker: CVSG

Share price at close: £18.06