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Opinions Stephen Takacsy, B. Eng, MBA
Pet Valu HoldingsPET.TOBUYSep 25, 2023
Stock price when the opinion was issued
As of Jun 15, 2026. Market Open.
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It has dropped from $40 to just under $22 including a 10% drop after its last report and is trading below its long term support level. Things have changed fundamentally since before 6 months to a year ago and there is some concern about the debt level being serviced. It hasn't been this low in a long time.
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Premium contentOur PAST TOP PICK with PET has triggered its stop at $35.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment gain of 31%, when combined with our previous guidance.
Premium contentPremium contentPremium contentPremium contentPremium contentPremium contentIt got very overvalued during the pandemic hype, but this has since normalized. However, systems sales are still growing as they open 40-45 new stores annually. The market remains underserved outside cities. A cap-lite model, generating 22% EBITDA margins, and over 20% ROIC. Strong free cash flow. A great time to buy at 16x PE. Is recession-proof. Likely a takeover candidate.
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Premium contentWe reiterate this Canadian based Pet store operator. Recently reported earnings showed a 28% increase in net income. The company has opened its Vancouver regional distribution centre, positioning well ahead of the holiday season. We like that cash reserves are growing, while debt is retired. We recommend trailing up the stop (from $16) to $18, looking to achieve $32 -- upside of 25%. Yield 1.7%
(Analysts’ price target is $31.82)Premium contentShares are basically flat over the past year do some quarterly misses, but its PE has fallen to 22.34x, below its 24.06x, making it an attractive entry point. It pays a moderate 1.72x dividend because the company is investing in expansion, which should bolster top and bottom lines in future quarters and reinforce the company's prominence in this healthy space.
It is a good price so he is adding more. It works on a franchise basis, has good management, and it is the only company expanding outside city centres. The only overhang is a big private equity company that owns a controlling position has been peeling off stock. However there is healthy organic growth going forward. Lots of pets were bought during the pandemic and they need food.