Use Blue Buffalo To Take Advantage Of The Leader In Wholesome Natural Pet Food

D.A. Davidson’s Eric M. Gottlieb mentioned that Blue Buffalo Pet Products Inc BUFF is the “largest player in the growing wholesome natural segment, by a 4x margin, and is the largest, publicly traded pureplay pet food producer.”

Gottlieb initiated coverage of the company with a Buy rating and price target of $29.

Leader Of Natural Pet Food Segment

The analyst noted that the company continues to gain share not only of the overall market, but also of the faster growing emerging channels. Blue Buffalo also continues to build its presence in pet superstores.

“The company sales are over-indexed puppies and kittens, as well as GenX and GenY, which bodes well for future growth potential,” Gottlieb stated.

Related Link: Blue Buffalo To Ring The NASDAQ Opening Bell

The analyst believes high brand loyalty will drive a robust revenue stream for Blue Buffalo, while additional pets owned by younger individuals could add to the pets served.

Double Digit Growth

The company has delivered double digit growth over the last few years and is expected to grow at a rate of 10 percent over the coming three to five years, as the overall market continues to grow and Blue Buffalo enters the e-commerce, veterinarian and international markets.

“Supply chain and gross margin efficiencies are beginning to take hold while a 3-year capital investment program should enable further productivity, flexibility and innovation. Combined with the top line growth, we find it reasonable that EPS growth should be in the 20 percent range over the next 3-5 years,” Gottlieb went on to say.

At last check, Blue Buffalo was up 2.28 percent at $24.25.

Full ratings data available on Benzinga Pro.