Petmed Express (PETS) AI Stock Analysis

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Petmed Express

(NASDAQ:PETS)

58Neutral

Petmed Express's overall stock score reflects a mixed financial and strategic outlook. Strong balance sheet stability is offset by weak profitability and overvaluation concerns. The recent earnings call highlights improvements in profitability and cost management, but declining sales and a challenging competitive environment weigh on the score. Technical indicators suggest bearish trends, further impacting the overall assessment.

Positive Factors

Financial Stability

The company is well-capitalized to make it through the turnaround, with $50M of cash and no debt.

Profit Margins

Gross margins for the quarter reached 29.1%, ahead of the 27.4% estimate, due to limited promotions and a focus on profitability.

Negative Factors

Customer Base

The company is likely losing customers to competitors with the absence of promotions.

Financial Outlook

The company will continue to be under pressure in the near term with financials remaining soft given the lack of visibility into the timeline of the turnaround and the continued macro challenges.

Revenue Performance

Q2 revenue declined 16% to $59.6M, which was below the $66.0M estimate, indicating customers reduced spending or sought promotions from competitors.

Petmed Express (PETS) vs. S&P 500 (SPY)

Market Cap

$68.58M

Dividend YieldN/A

Average Volume (3M)208.34K

Price to Earnings (P/E)287.9

Beta (1Y)1.11

Revenue Growth-10.82%

EPS GrowthN/A

CountryUS

Employees287

SectorHealthcare

Sector Strength78

IndustryMedical - Pharmaceuticals

Share Statistics

EPS (TTM)0.01

Shares Outstanding20,656,458

10 Day Avg. Volume177,364

30 Day Avg. Volume208,335

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.36

Price to Cash Flow (P/CF)-18.80

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$4.00

Price Target Upside29.87% Upside

Rating ConsensusHold

Number of Analyst Covering1

Petmed Express Business Overview & Revenue Model

Company DescriptionPetmed Express, Inc., doing business as 1-800-PetMeds, operates as a leading nationwide pet pharmacy in the United States. The company is primarily involved in the retail of prescription and non-prescription pet medications and health products for dogs, cats, and horses directly to the consumer. Utilizing a direct-to-consumer sales model, Petmed Express offers a wide selection of products including prescription medications, over-the-counter products, and pet wellness products through its website and call center.

How the Company Makes MoneyPetmed Express makes money by selling pet medications and health-related products through its online platform and call center. The company's revenue model is primarily based on the retail sale of prescription and non-prescription medications, where customers purchase products directly from Petmed Express. Key revenue streams include sales of prescription medications, which require a prescription from a vet, and non-prescription products such as flea and tick control, nutritional supplements, and hygiene products. Petmed Express benefits from its direct-to-consumer model, which eliminates the need for physical retail locations and allows for competitive pricing. Additionally, the company has established partnerships with veterinary suppliers and manufacturers to source a comprehensive range of pet health products. Factors contributing to its earnings include a broad customer base, repeat purchases from pet owners, and the growing trend of pet humanization which drives demand for high-quality pet healthcare products.

Petmed Express Financial Statement Overview

Summary

Petmed Express shows strong balance sheet stability with a low debt-to-equity ratio and solid cash reserves. However, weak profitability and inconsistent cash flow performance are concerns. Positive operational improvements in EBIT and EBITDA margins are noted, but overall financial performance needs enhancement in revenue growth and free cash flow optimization.

Income Statement

Neutral

The income statement reflects a challenging period for Petmed Express. While there is a positive gross profit margin of 26.22% in TTM, the net profit margin is low at 0.14%, indicating tight profitability. Revenue growth has been inconsistent, with a decline in revenue from 2023 to 2024. EBIT and EBITDA margins have improved from negative values in 2023 to positive in TTM, suggesting some operational improvements but overall financial performance remains weak.

Balance Sheet

Positive

Petmed Express maintains a solid balance sheet with a low debt-to-equity ratio of 0.01, indicating strong financial stability. The equity ratio of 66.43% is robust, reflecting a healthy capital structure. Return on equity is modest at 0.37%, impacted by low profitability. Cash reserves are strong, providing a cushion against potential financial volatility.

Cash Flow

Positive

The cash flow statement shows mixed performance. The operating cash flow to net income ratio is strong at 13.54, indicating effective cash generation relative to net income. However, free cash flow growth is volatile, and the free cash flow to net income ratio is low at 2.40, reflecting limited free cash flow relative to earnings. While cash flow from operations is stable, improvements in free cash flow are necessary.

TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
247.01M	281.06M	256.86M	273.42M	309.21M	284.13M
	Gross Profit
64.75M	78.65M	71.01M	78.08M	89.95M	81.25M
	EBIT
555.00K	-8.16M	-1.43M	25.71M	37.59M	30.98M
	EBITDA
7.87M	-1.11M	2.12M	28.45M	40.01M	33.23M
	Net Income Common Stockholders
357.00K	-7.46M	233.00K	18.72M	23.92M	25.85M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
53.14M	55.30M	104.09M	111.08M	118.72M	103.76M
	Total Assets
104.17M	169.88M	164.12M	176.32M	187.50M	155.32M
	Total Debt
0.00	1.45M	0.00	0.00	0.00	0.00
	Net Debt
-53.14M	-53.84M	-104.09M	-111.08M	-118.72M	-103.76M
	Total Liabilities
7.31M	73.15M	40.32M	34.13M	46.22M	25.31M
	Stockholders Equity
96.86M	96.73M	123.80M	142.19M	141.28M	130.01M
Cash Flow		Free Cash Flow
856.00K	-194.00K	22.54M	16.75M	37.64M	36.53M
	Operating Cash Flow
4.83M	4.32M	27.80M	18.50M	40.08M	38.84M
	Investing Cash Flow
-3.98M	-40.67M	-10.26M	-1.75M	-2.43M	-2.31M
	Financing Cash Flow
-194.00K	-12.44M	-24.54M	-24.38M	-22.69M	-33.30M

Petmed Express Technical Analysis

Technical Analysis Sentiment

Negative

Last Price3.08

Price Trends

50DMA

4.34

Negative

100DMA

4.71

Negative

200DMA

4.24

Negative

Market Momentum

MACD

-0.07

Negative

RSI

43.19

Neutral

STOCH

60.20

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PETS, the sentiment is Negative. The current price of 3.08 is below the 20-day moving average (MA) of 4.00, below the 50-day MA of 4.34, and below the 200-day MA of 4.24, indicating a bearish trend. The MACD of -0.07 indicates Negative momentum. The RSI at 43.19 is Neutral, neither overbought nor oversold. The STOCH value of 60.20 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PETS.

Petmed Express Risk Analysis

Petmed Express disclosed 33 risk factors in its most recent earnings report. Petmed Express reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Petmed Express Peers Comparison

Overall Rating

UnderperformOutperform

Sector (48)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FONR	63 Neutral	$84.43M	11.50	4.68%	―	-0.83%	-38.41%
PETS	58 Neutral	$68.58M	287.85	0.36%	―	-10.82%	―
Sector *	48 Neutral	$6.27B	1.17	-48.19%	2.68%	17.28%	1.24%
SY	47 Neutral	$82.28M	17.80	-27.49%	―	-3.53%	-2848.11%
ZURA	43 Neutral	$78.63M	―	-44.03%	―	―	86.65%
VOR	34 Underperform	$70.80M	―	-94.52%	―	―	2.98%
CLYM	29 Underperform	$78.95M	―	-46.26%	―	―	-44.51%

* Healthcare Sector Average

Performance Comparison

PETS

Petmed Express

3.08

-1.20

-28.04%

FONR

Fonar

12.57

-5.49

-30.40%

So-Young International

0.73

-0.36

-33.03%

VOR

Vor Biopharma

0.55

-1.42

-72.08%

CLYM

Climb Bio

1.13

-1.54

-57.68%

ZURA

Zura Bio

1.13

-1.65

-59.35%

Petmed Express Earnings Call Summary

Earnings Call Date: Feb 10, 2025 | % Change Since: -41.56% | Next Earnings Date: May 12, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with significant progress in profitability and cost-cutting measures, alongside challenges in sales and competitive pressures. The company is making strategic investments to modernize its technology and improve customer experience, aiming for long-term growth.

Highlights

Return to Profitability

The company achieved $2 million in adjusted EBITDA, representing a $1.1 million improvement year-over-year, with a reduction of G&A expenses by $2.6 million.

Cost Cutting Achievements

Implemented cost-cutting measures and consolidation strategies targeting $5 million in annualized savings, on track to meet this milestone.

Inventory Efficiency Improvement

Inventory efficiency improved with inventory turn rising to 1.5 in Q3, alongside a 66% reduction in total inventory on hand.

Technological Advancements

Website and mobile enhancements, including a full website refresh and the relaunch of iOS and Android mobile apps, were implemented to modernize the tech stack.

Lowlights

Decline in Net Sales

Net sales were $53 million, a 19% decline from $65.3 million in the same period last year, primarily driven by a 34% reduction in gross advertising.

Competitive Holiday Environment

The company faced a highly competitive and promotional holiday environment, leading to a strategic decision to prioritize margin protection over aggressive promotions, resulting in lower sales and new customer acquisition.

Challenges in Customer Conversion

Lower conversion rates were noted despite increased channel visits, with ongoing efforts to address these challenges through search functionality improvements and visible promotions.

Company Guidance

During the PetMed Express fiscal third quarter 2025 earnings call, CEO Sandra Campos outlined key strategic initiatives aimed at repositioning the company for long-term success. The company reported achieving $2 million in adjusted EBITDA, marking a $1.1 million improvement year-over-year, alongside a reduction in general and administrative expenses by $2.6 million compared to the previous year. Despite a 19% decline in net sales to $53 million, largely due to a 34% reduction in gross advertising spend, the company focused on profitability by implementing cost-cutting measures, including a $5 million target in annualized savings from integrating PetCareRx operations. PetMed also highlighted digital enhancements, such as a full website refresh and app relaunch, which contributed to an increase in gross new customers to 84,000. Additionally, the average order value saw a 7% increase to $108. Inventory efficiency improved significantly, with inventory turn rising to 1.5 and a 66% reduction in total inventory on hand. While navigating a competitive market environment, PetMed emphasized its commitment to financial efficiency, customer experience enhancement, and capturing market share in the companion animal health sector.

Petmed Express Corporate Events

Business Operations and Strategy

PetMed Express Implements Shareholder Rights Protection Plan

Neutral

Dec 3, 2024

PetMed Express, Inc. has introduced a limited duration shareholder rights plan aimed at protecting shareholder investments by preventing any entity from gaining control of the company without paying a premium. This plan, effective December 16, 2024, issues rights for each share of common stock and becomes exercisable if someone acquires 12.5% or more of the stock without board approval. The rights allow shareholders to purchase stock at a discount, ensuring the board can make decisions benefiting all shareholders without hindering approved mergers or sales.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.