Freshpet (FRPT)

Pet food company Freshpet (NASDAQ:FRPT) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 14% year on year to $288.8 million. Its GAAP profit of $1.86 per share was significantly above analysts’ consensus estimates.

Company Overview

Standing out from typical processed pet foods, Freshpet (NASDAQ:FRPT) is a pet food company whose product portfolio includes natural meals and treats for dogs and cats.

The perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.

Competitors in the better-for-you pet food space include Blue Buffalo (owned by General Mills, NYSE:GIS) and Hill's Pet Nutrition (owned by Colgate-Palmolive, NYSE:CL). Private competitors include The Farmer's Dog and Ollie.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $1.08 billion in revenue over the past 12 months, Freshpet is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers. On the bright side, it can grow faster because it has a longer list of untapped store chains to sell into.

As you can see below, Freshpet’s 25.6% annualized revenue growth over the last three years was exceptional as consumers bought more of its products.

This quarter, Freshpet reported year-on-year revenue growth of 14%, and its $288.8 million of revenue exceeded Wall Street’s estimates by 1.7%.

Looking ahead, sell-side analysts expect revenue to grow 10.5% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is admirable and implies the market sees success for its products.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Freshpet’s average quarterly volume growth of 20.6% over the last two years has beaten the competition by a long shot. This is great because companies with significant volume growth are needles in a haystack in the stable consumer staples sector.

In Freshpet’s Q3 2025, sales volumes jumped 12.9% year on year. This result shows the business is staying on track, but the deceleration suggests growth is getting harder to come by.

Freshpet has good unit economics for a consumer staples company, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 39.7% gross margin over the last two years. That means for every $100 in revenue, $60.31 went towards paying for raw materials, production of goods, transportation, and distribution.

Freshpet produced a 39.5% gross profit margin in Q3, in line with the same quarter last year. Zooming out, Freshpet’s full-year margin has been trending up over the past 12 months, increasing by 1.9 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).

Freshpet was profitable over the last two years but held back by its large cost base. Its average operating margin of 4.2% was weak for a consumer staples business. This result is surprising given its high gross margin as a starting point.

On the plus side, Freshpet’s operating margin rose by 1.1 percentage points over the last year, as its sales growth gave it operating leverage.

This quarter, Freshpet generated an operating margin profit margin of 8.6%, up 3.9 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, Freshpet reported EPS of $1.86, up from $0.24 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 Freshpet’s full-year EPS of $2.29 to shrink by 26.8%.

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.

While Freshpet posted positive free cash flow this quarter, the broader story hasn’t been so clean. Freshpet’s demanding reinvestments have consumed many resources over the last two years, contributing to an average free cash flow margin of negative 3.1%. This means it lit $3.14 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Freshpet’s margin expanded by 7.3 percentage points over the last year. Despite its improvement and recent free cash flow generation, we’d like to see more quarters of positive cash flow before recommending the stock.

Freshpet’s free cash flow clocked in at $31.56 million in Q3, equivalent to a 10.9% margin. This result was good as its margin was 2.2 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Freshpet’s five-year average ROIC was negative 0.8%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer staples sector.

Freshpet reported $274.6 million of cash and $494.8 million 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 $187.2 million of EBITDA over the last 12 months, we view Freshpet’s 1.2× net-debt-to-EBITDA ratio as safe. We also see its $2.24 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 Freshpet beat analysts’ revenue and EPS expectations this quarter on solid volume growth. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 6.8% to $52.55 immediately following the results.

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

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Freshpet.

Freshpet’s business quality ultimately falls short of our standards. Although its revenue growth was exceptional over the last three years, it’s expected to deteriorate over the next 12 months and its projected EPS for the next year is lacking. And while the company’s volume growth has been in a league of its own, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Freshpet’s P/E ratio based on the next 12 months is 42.8x. This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $70.67 on the company (compared to the current share price of $61.83).