Central Garden & Pet (CENT)

Pet company Central Garden & Pet (NASDAQ:CENT) announced better-than-expected revenue in Q3 CY2025, with sales up 1.3% year on year to $678.2 million. Its non-GAAP loss of $0.09 per share was 54.3% above analysts’ consensus estimates.

Company Overview

Enhancing the lives of both pets and homeowners, Central Garden & Pet (NASDAQ:CENT) is a leading producer and distributor of essential products for pet care, lawn and garden maintenance, and pest control.

Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.

Competitors in the pet care space include Hill's Science Diet (owned by Colgate-Palmolive, NYSE:CL) and private companies Mars Petcare, Nestlé Purina while pest control and lawn and garden competitors include Scotts Miracle-Gro (NYSE:SMG) and Spectrum Brands (NYSE:SPB) along with private company Terminix.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.

With $3.13 billion in revenue over the past 12 months, Central Garden & Pet carries some recognizable products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale.

As you can see below, Central Garden & Pet’s revenue declined by 2.1% per year over the last three years, a rough starting point for our analysis.

This quarter, Central Garden & Pet reported modest year-on-year revenue growth of 1.3% but beat Wall Street’s estimates by 3.9%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection suggests its newer products will fuel better top-line performance, it is still below average for the sector.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Central Garden & Pet’s unit economics are higher than the typical consumer staples company, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 31% gross margin over the last two years. Said differently, Central Garden & Pet paid its suppliers $69.00 for every $100 in revenue.

In Q3, Central Garden & Pet produced a 29% gross profit margin, marking a 3 percentage point increase from 26% in the same quarter last year. Central Garden & Pet’s full-year margin has also been trending up over the past 12 months, increasing by 2 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Central Garden & Pet has done a decent job managing its cost base over the last two years. The company has produced an average operating margin of 7.6%, higher than the broader consumer staples sector.

Analyzing the trend in its profitability, Central Garden & Pet’s operating margin rose by 1.3 percentage points over the last year, showing its efficiency has improved.

This quarter, Central Garden & Pet’s breakeven margin was in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, Central Garden & Pet reported adjusted EPS of negative $0.09, up from negative $0.19 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Central Garden & Pet’s full-year EPS of $2.72 to grow 2.6%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Central Garden & Pet has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.2% over the last two years, quite impressive for a consumer staples business.

Taking a step back, we can see that Central Garden & Pet’s margin dropped by 1.7 percentage points over the last year. This decrease warrants extra caution because Central Garden & Pet failed to grow its revenue organically. Its cash profitability could decay further if it tries to reignite growth through investments.

Central Garden & Pet’s free cash flow clocked in at $171.9 million in Q3, equivalent to a 25.3% margin. The company’s cash profitability regressed as it was 3.5 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Central Garden & Pet historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.5%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.

Central Garden & Pet reported $898.4 million of cash and $1.44 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $355.4 million of EBITDA over the last 12 months, we view Central Garden & Pet’s 1.5× net-debt-to-EBITDA ratio as safe. We also see its $32.81 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Central Garden & Pet beat analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. On the other hand, its full-year EPS guidance slightly missed. Zooming out, we think this was a good print with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 1.8% to $30.86 immediately following the results.

Updated: December 4, 2025 at 9:49 PM EST

Before deciding whether to buy Central Garden & Pet or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Central Garden & Pet falls short of our quality standards. To kick things off, its revenue has declined over the last three years. And while its strong free cash flow generation allows it to invest in growth initiatives while maintaining an ample cushion, the downside is its projected EPS for the next year is lacking. On top of that, its mediocre ROIC lags the market and is a headwind for its stock price.

Central Garden & Pet’s P/E ratio based on the next 12 months is 12.2x. This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $42.33 on the company (compared to the current share price of $33.39).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.