Petco Health and Wellness Company, Inc. (WOOF) and BARK, Inc. (BARK) are two prominent players in the pet care industry. WOOF operates as a premium pet consumable, supplies, and services retailer. The company also offers grooming, in-store and online training, tele-veterinarian, pet health insurance services, and veterinary services through Vetco clinics. It sells its products through petco.com, petcoach.co, petinsurancequotes.com, and pupbox.com websites. In comparison, BARK is a dog-centric company that provides dogs' products, services, and content. It offers custom collections through online marketplaces, BarkShop.com website, and brick-and-mortar retail partners.
With the significant increase in pet ownership amid the pandemic-led remote lifestyle, the demand for pet care products, viable medications, and food increased. The global pet care market is expected to grow at a 6.1% CAGR and reach $350 billion by 2027. So, both WOOF and BARK should benefit.
WOOF is a winner with 3.6% gains versus BARK’s 8.1% loss over the past week. But which of these stocks is a better pick now? Let’s find out.
Recent Financial Results
WOOF’s net sales for its fiscal 2021 third quarter ended October 30, 2021, increased 14.6% year-over-year to $1.44 billion. The company’s gross profit came in at $594.71 million, indicating a 9.8% year-over-year improvement. Its operating income came in at $61.95 million, up 34.6% from the prior-year period. While its adjusted income increased 296.6% year-over-year to $53.98 million, its adjusted EPS grew 185.7% to $0.20. As of October 31, 2021, the company had $221.48 million in cash and cash equivalents.
For its fiscal 2022 third quarter ended December 31, 2021, BARK’s revenue increased 33.9% year-over-year to $140.81 million. The company’s gross profit came in at $78.41 million, representing a 31.8% rise from the prior-year period. Its loss from operations came in at $27.06 million, representing a 40.1% year-over-year rise. BARK’s adjusted net loss came in at $20.74 million, up 5.2% from the prior-year period. Its adjusted loss per share came in at $0.12, down 72.1% from the year-ago period. The company had $228.69 million in cash and cash equivalents as of December 31, 2021.
Expected Financial Performance
WOOF’s EPS is expected to grow 3.4% year-over-year in fiscal 2023, ended January 31, 2023. Its revenue is expected to grow 5.9% year-over-year in the same quarter.
In comparison, analysts expect BARK’s EPS to remain negative in fiscal 2023, ending March 31, 2023. Its revenue is expected to increase 28.8% year-over-year in fiscal 2023.
Valuation
In terms of forward EV/Sales, WOOF is currently trading at 1.32x, 106.3% higher than BARK’s 0.64x. In terms of trailing-12-month Price-to-Book, BARK’s 1.93x compares with WOOF’s 2.15x.
Profitability
WOOF’s trailing-12-month revenue is almost 11.5 times BARK’s. WOOF is also more profitable, with an 8.4% EBITDA margin versus BARK’s negative value.
Furthermore, WOOF’s ROE, ROA, and ROTC of 9.1%, 3%, and 3.6% compare with BARK’s respective negative values.
POWR Ratings
While WOOF has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, BARK has an overall D grade, equating to a Sell. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
Both WOOF and BARK have a C grade for Momentum, which is in sync with its mixed price performance over the past year. WOOF has lost 0.7% over the past month, while BARK has lost 21.3%.
Of the 62 stocks in the C-rated Consumer Goods industry, WOOF is ranked #11.
BARK is ranked #43 of 46 stocks in the C-rated Specialty Retailers industry.
Beyond what we have stated above, our POWR Ratings system has also rated WOOF and BARK for Stability, Sentiment, Value, Growth, and Quality. Get all WOOF ratings here. Also, click here to see the additional POWR Ratings for BARK.
The Winner
The growing demand in this recession-proof industry should drive the performance of WOOF and BARK. However, higher profitability makes WOOF a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Consumer Goods industry, and here for those in the Specialty Retailers industry.
WOOF shares were trading at $17.87 per share on Monday afternoon, down $0.37 (-2.03%). Year-to-date, WOOF has declined -9.70%, versus a -11.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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