Pet Valu is in the doghouse right now, this analyst says

Beacon Securities analyst Doug Cooper lowered his price target on Pet Valu Holdings (Pet Valu Holdings Stock Quote, Chart, News, Analysts, Financials TSX:PET) to $35 from $45 while maintaining a “Buy” rating, saying the stock may remain “in the dog house” for the next couple of quarters following softer guidance.

The new target is based on 10x EBITDA, down from 12x previously.

Pet Valu reported Q4 system-wide sales of $423.7-million, up 9.2% year-over-year, with revenue increasing 10.6% to $326.4-million. Adjusted EBITDA was $74.6-million, up 9.3%, with a margin of 22.9%, down 20 basis points year-over-year. Same-store sales growth was 0.3%.

For fiscal 2025, the company reported revenue of $1.176-billion, Adjusted EBITDA of $257.0-million and EPS of $1.61, with same-store sales growth of 1.7%.

Q4 revenue included $121.3-million from corporate stores, reflecting expansion to 250 locations, and $205.1-million from franchise operations, up 7.8% year-over-year. Gross margin was 33%, down 100 basis points year-over-year, while merchandise margins improved sequentially. Net debt declined to $253.0-million, supported by strong free cash flow, allowing for a modest dividend increase.

Shares fell 13% following the results and are now down approximately 40% from their September peak, trading near five-year lows. Cooper attributed the selloff primarily to fiscal 2026 guidance that fell short of expectations.

“The drop in the stock now removes the premium at which PET traded versus other Canadian retailers,” the analyst said.

On revised 2026 estimates, the shares trade at approximately 15x earnings, compared with 13.2x for Canadian Tire and 12x for Leon’s. However, Cooper argues the stock now offers relative value versus Canadian grocery peers, which trade at materially higher multiples.

He expects Pet Valu to generate $264.0-million in Adjusted EBITDA on revenue of $1.19-billion in fiscal 2026.

“After two consecutive quarters of results that missed expectations, we believe the company needs to rebuild confidence before a premium multiple is re-established,” Cooper said, adding that continued market share gains, a completed distribution centre expansion program and strong free cash flow generation support longer-term upside.

-30-