Pet Valu is an “iconic” brand, this analyst says

In a Nov. 5 report, Beacon Securities analyst Doug Cooper said that with earnings growth accelerating and free cash flow positioned to fund share buybacks and dividend increases, Christmas may indeed be coming early for Pet Valu (Pet Valu Stock Quote, Chart, News, Analysts, Financials TSX:PET) investors.

He maintained his “Buy” rating and $45.00 target price on Pet Valu, based on 12× FY26 Adjusted EBITDA and 25× P/E. Cooper said the company’s third-quarter results were largely in line with expectations, though guidance was tightened toward the lower end of prior ranges.

Pet Valu reported systemwide sales of $374-million, up 4.4% year over year, with revenue rising 5% to $289.5-million. Adjusted EBITDA was $63.6-million, a 22% margin, down slightly from $64.6-million a year earlier. The company now expects FY25 revenue of $1.175- to $1.185-billion, Adjusted EBITDA of $257- to $260-million, and EPS of $1.63- to $1.66. Cooper said third-quarter same-store sales growth of 2.3%, the best in two years, shows the retailer “continues to gain market share.”

Gross margin was 33%, up 60 basis points year over year, while net debt fell $21-million sequentially to $279-million.

Cooper said Pet Valu remains a “strong cash-flow generator,” producing $25-million in free cash flow during the quarter, about 40% of Adjusted EBITDA.

Despite those fundamentals, shares dropped 16% on the results to $29.95, down 24% from September highs. Cooper called the sell-off an overreaction to the narrower guidance and broader economic concerns.

“At roughly 15× FY26 earnings, the stock represents good value,” he wrote, noting that Pet Valu trades at a discount to Canadian retailers such as Loblaw, Metro, and Dollarama, which trade between 18× and 28× forward P/E.

“Pet Valu has become one of Canada’s iconic grocery retail brands,” Cooper said, arguing it deserves a premium multiple given stronger growth and higher margins. He added that continued market-share gains and cash generation could make the company an attractive acquisition target for a larger retailer.

Cooper noted several catalysts for upside, including completion of a $100-million capital program that expanded distribution centres in Toronto, Vancouver, and Calgary. He said the infrastructure now supports up to 1,200 stores, compared with 841 currently, enabling scale growth without major new spending. Franchise expansion, now 608 locations, should also drive recurring royalty and wholesale revenue.

Cooper forecasts Pet Valu will generate $259.5-million in Adjusted EBITDA on $1.178-billion in revenue in fiscal 2025, improving to $277.2-million on $1.236-billion in 2026.

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