The pet industry in America has experienced remarkable growth as pet ownership reaches new heights and consumers increasingly view their pets as integral family members. Therefore, investors might consider keeping an eye on pet stocks such as Chewy, Inc. (CHWY), Petco Health and Wellness Company, Inc. (WOOF), and PetMed Express, Inc. (PETS) for growth prospects.
With rising pet ownership comes an increasing willingness to invest in quality pet care for high-end pet food, veterinary services, and pet accessories. As per PetButler, over 70% of U.S. households now own at least one pet, driving the market forward. Hence, consumers are seeking the best nutrition for their pets and embracing innovative products that enhance their pets' well-being and happiness, creating opportunities for pet companies.
From e-commerce channels that streamline shopping for pet supplies to the integration of smart technology in pet care, these companies are making it easier for consumers to provide the best for their furry friends. The rise in e-commerce has made it easier for pet owners to access a wide variety of products, often at competitive prices. Also, the global pet care market is anticipated to reach $427.75 billion by 2032, exhibiting a CAGR of 6.4%.
With that in mind, let’s examine the fundamentals of the three above-mentioned pet stocks.
Chewy, Inc. (CHWY)
CHWY is a pure-play e-commerce company geared towards pet products and services for dogs, cats, fish, birds, small pets, horses, and reptiles. It offers pet food and treats, pet supplies and medications, and other pet health products through its retail websites and mobile applications.
In terms of forward non-GAAP PEG, CHWY is trading at 1.27x, 13.7% lower than the industry average of 1.47x. Likewise, the stock’s forward EV/Sales multiple of 1.24 is 2.3% and 43.9% lower than the respective industry average of 1.27.
For the third quarter of 2024, which ended on October 27, CHWY's net sales increased 4.8% year-over-year to $2.88 billion, while the gross profit stood at $843.87 million, up 7.9% year-over-year. Its adjusted EBITDA rose 67.4% from the year-ago value to $138.25 million.
Its adjusted net income amounted to $84.92 million, representing an increase of 33.8% from the last year’s period. Also, the company’s adjusted earnings per share for the quarter increased 33.3% year-over-year to $0.20.
The consensus revenue estimate of $3.20 billion for the fiscal fourth quarter (ended January 2025) represents a 12.9% increase year-over-year. The consensus EPS estimate of $0.20 for the ongoing quarter indicates a 10.4% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 116.2%, closing the last trading session at $35.82.
CHWY’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CHWY has a B grade for Quality. It is ranked #13 out of 53 stocks in the B-rated Consumer Goods industry. Click here to see the additional ratings for CHWY (Growth, Value, Momentum, Stability, and Sentiment).
Petco Health and Wellness Company, Inc. (WOOF)
WOOF is a pet health and wellness company that focuses on improving the lives of pets, pet parents, and its own Petco partners. The company provides veterinary care, grooming, training, telehealth, Vital Care, pet health insurance services, and veterinary services through Vetco mobile clinics.
In terms of forward EV/Sales, WOOF is trading at 0.60x, 53.2% lower than the industry average of 1.27x. Likewise, the stock’s forward Price/Book and Price/Cash Flow multiples of 0.68 and 2.60 are 73.8% and 75.9% lower than the industry averages of 2.59x and 10.82x, respectively.
In the fiscal third quarter that ended on November 2, 2024, WOOF’s total net sales increased marginally year-over-year to $1.51 billion. The company reported gross profit of $575.76 million, indicating a 4.7% growth from the prior-year quarter. Its adjusted EBITDA grew 12.6% from the prior-year quarter to $81.23 million, with an adjusted EBITDA margin of 5.4% (up 60 bps year-over-year).
Analysts expect WOOF’s revenue for the current year (ended January 2025) to be $6.12 billion. For the fiscal year 2026, its revenue and EPS are expected to grow by 2.3% and remain flat from the prior year to $6.26 billion and $0.05, respectively.
WOOF’s shares have surged 12.8% over the past year to close the last trading session at $2.82.
WOOF’s stance is apparent in its POWR Ratings. The stock has a B grade for Growth and Quality. Among the 53 stocks in the same Consumer Goods industry, it is ranked #17. Click here to see the additional WOOF ratings (Value, Momentum, Stability, and Sentiment).
PetMed Express, Inc. (PETS)
PETS operates as a pet pharmacy that provides prescription and non-prescription pet medications, health products, and other supplies for dogs, cats, and horses. The company markets and sells directly to consumers through its websites, toll-free numbers, and employer benefit partnerships.
In terms of forward EV/Sales, PETS is trading at 0.19x, which is 85.2% lower than the industry average of 1.27x. The stock’s forward Price/Sales ratio of 0.40x is 59.1% below the industry average of 0.98x. Also, its forward EV/EBIT multiple of 12.15 compares to the industry average of 15.06x.
During the nine-month period that ended on December 31, 2024, PETS’ net sales amounted to $180.51 million. Its income from operations came in at $4.49 million compared to the year-ago net loss of $4.32 million.
In addition, the company’s net income stood at $5.37 million compared to the prior-year period’s loss of $2.45 million, while its EPS came in at $0.26 versus a loss of $0.12 per share last year. Also, the adjusted EBITDA was $2.56 million.
Street expects PETS’ revenue for the fiscal year (ending March 2025) to decline 17.6% year-over-year to $231.60 million. Its EPS for the same period is expected to remain flat from the prior year, settling at $0.21.
The stock has gained 44.8% over the past six months and 8.9% over the past nine months to close the last trading session at $4.49.
PETS’ fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth and Value. It is ranked #28 out of 65 stocks in the Medical - Services industry.
Beyond what is stated above, we’ve also rated PETS for Momentum, Stability, Sentiment, and Quality. Get all PETS’ ratings here.
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CHWY shares were trading at $36.42 per share on Thursday afternoon, up $0.60 (+1.68%). Year-to-date, CHWY has gained 8.75%, versus a 0.22% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
