Petco Health and Wellness Company (WOOF) reported record revenues and earnings for its second quarter ended in July. The stock has gained more than 10% in price since its earnings release. However, given its lower-than-industry profit margins, will WOOF be able to sustain the rising investor interest in the stock? Read more to find out.San Diego, Calif.-based Pet products retailer Petco Health and Wellness Company, Inc.’s (WOOF) revenues rose 19% year-over-year to $1.40 billion in its fiscal second quarter ended July 31, surpassing the $1.37 billion consensus estimate. This can be attributed to a 20% rise in comparable sales. Its adjusted EBITDA came in at $155.10 million, up 19% from the same period last year. And its net income rose 1062% from the prior-year quarter to $74.86 million. Its EPS improved 696% from its year-ago value to $0.28, which is 40% higher than the Street’s $0.20 estimate.
Shares of WOOF have gained 10.2% since the company reported its quarterly results on August 19. However, the stock has declined 26.2% in price since its stock market debut on January 14. It is currently trading 21% above its all-time low of $17.86, which it hit on March 5. Moreover, the stock is trading below its $22.36 200-day moving average.
The weak price performance reflects depressed investor optimism regarding the stock, owing to its low-profit margins. WOOF’s 5.87% trailing-12-month ROE is 65.5% lower than the 17.03% industry average.