Goldman expects strong growth for Pets at Home

Goldman Sachs has initiated coverage of Pets at Home (PAH) with a 'buy' rating, saying that it expects the company to grow sales and profit strongly over the next three years.The US bank has set a 12-month target price for the stock at 242p, which implies 16% potential upside from current prices.Ahead of PAH's annual results due June 12th, the US bank said it forecasts sales of £679m for the year to end-March, up from £598m the year before. Earnings per share are expected to rise to 9.56p from 5.59p.Goldman said that the results will highlight the company's "robust like-for-like (LFL) growth against a mixed retail backdrop and continued solid cash flow generation".It also applauded PAH's "multi-faceted growth strategy", which includes the aggressive increase in the penetration of veterinary and grooming services within its stores."The robust business model, with high relative market share, relatively low online threat and a highly engaged customer, has delivered positive LFL growth ahead of the UK retail sector since 2008." "From its strong industry position, we forecast PAH can expand its UK store base from 370 stores to 500 stores, while the introduction of capital-light veterinary services drives footfall and increases store profitability and cash return on capital invested (CROCI)."The stock was 1% higher at 211.3p on Tuesday morning.BC