PET operates as a specialty pet retailer that has been quite resilient amid a challenging macro environment and is now trading at 19x times' Forward P/E. Growth has been quite impressive over the last few years around 15% on average. The balance sheet is quite leveraged, with net debt of $567M. Total debt is around 4.4x times trailing twelve-month cash flow of $119M, and cash flow declined a bit compared to last year due to investment in inventories. Based on management’s guidance, sales in 2023 are expected to grow around 10% driven by strong same-store sales and new store openings. Here are comments on the recent quarter.
We like PET and we think the company is trading at a reasonable valuation given the growth profile, although investors also need to keep in mind that the company’s leverage is quite high. We would be comfortable buying at this price.