The Monthly Gems by Allan Tong Petco Health and Wellness WOOF-Q TOP PICK Jul 06, 2022

Stockchase Research Editor: Michael O'Reilly WOOF operates over 1400 pet care centers and 137 veterinary hospitals in the US. They recently reported revenue grew over $1.4 billion-up over 18% and easily beating market expectations. Revenue is now up over 30% from pre-pandemic levels. Recurring revenue (through subscription food delivery, insurance, and care memberships) was up 60%. With strong earnings expectations again for next year, the PEG ratio is estimated under 1.0 and it is currently trading at under 2.3x book value. We would buy this with a stop loss at $18.50, looking to achieve $28 -- upside potential over 27%. Yield 0% (Analysts’ price target is $27.89)

Stockchase Research Editor: Michael O'Reilly We reiterate WOOF, operator of over 1400 pet care centers and 137 veterinary hospitals in the US, as a TOP PICK. With analysts expecting EPS growth over 40% annual for the next five years and a forward PE of under 25x, it is good value here. We also like seeing the CEO and Chairman purchasing over $1 million in stock at $21.72. We would buy this with a stop loss at $18.50, looking to achieve $28 -- upside potential over 30%. Yield 0% (Analysts’ price target is $27.33)

(A Top Pick Sep 30/21, Down 13.1%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with WOOF has triggered its stop at $18.50. To remain disciplined, we recommend covering the position at this time. Combined with our previous buy recommendation, this will result in a net investment loss of 13.9%. We will look for better opportunities.

Stockchase Research Editor: Michael O'Reilly The health and wellness company focusing on pets has been in the proverbial dog house since its IPO. However now the valuation is starting to make sense. Recently released earnings beat expectations and forward guidance is in line with market expectations -- quite something in an market environment dealing with supply-chain and inflationary issues. Forward earnings project a PE at 14x, at par with peers and cash reserves are growing. It trades at only 1.5x book value. We recommend a stop loss at $11.50, looking to achieve $24 -- upside potential over 60%. Yield 0% (Analysts’ price target is $24.00)

Stockchase Research Editor: Michael O'Reilly This pet wellness company has demonstrated net sales growth for 14 consecutive quarters and is reiterated as a TOP PICK. It acts a good inflation hedge and is recession proof as many products are viewed essential by pet owners. It trades at 1.5x book value. We like that it has grown cash reserves will retiring debt. We continue to recommend a trailing stop at $11.50, looking to achieve $22.50 -- over 50% potential upside. Yield 0% (Analysts’ price target is $22.58)

(A Top Pick Jun 30/22, Down 21.9%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with WOOF has triggered its stop at $11.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 20%, when combined with the previous buy recommendation.