Freshpet (FRPT)

Pet food company Freshpet (NASDAQ:FRPT) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 8.6% year on year to $285.2 million. Its GAAP profit of $0.64 per share was 64.7% 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 sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.10 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 grew its sales at an excellent 22.8% compounded annual growth rate over the last three years as consumers bought more of its products.

This quarter, Freshpet grew its revenue by 8.6% year on year, and its $285.2 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9.1% over the next 12 months, a deceleration versus the last three years. Still, this projection is noteworthy and indicates the market is baking in 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 19.3% 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 Q4 2025, sales volumes jumped 9.7% year on year. This result shows the business is staying on track, but the deceleration suggests growth is getting harder to come by.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products, has a stronger brand, and commands pricing power.

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 40.7% gross margin over the last two years. Said differently, Freshpet paid its suppliers $59.29 for every $100 in revenue.

This quarter, Freshpet’s gross profit margin was 43.3%, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Freshpet was profitable over the last two years but held back by its large cost base. Its average operating margin of 5.5% 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 3 percentage points over the last year, as its sales growth gave it operating leverage.

This quarter, Freshpet generated an operating margin profit margin of 15.6%, up 8.2 percentage points year on year. The increase was solid, 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 long-term 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.

Freshpet’s full-year EPS flipped from negative to positive over the last three years. This is encouraging and shows it’s at a critical moment in its life.

In Q4, Freshpet reported EPS of $0.64, up from $0.36 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 $2.52 to shrink by 46.6%.

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.

Freshpet broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Taking a step back, an encouraging sign is that Freshpet’s margin expanded by 4.5 percentage points over the last year. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Freshpet broke even from a free cash flow perspective in Q4. This result was good as its margin was 3.7 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? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Freshpet historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 0.1%, lower than the typical cost of capital (how much it costs to raise money) for consumer staples companies.

Freshpet reported $278 million of cash and $495 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 $195.7 million of EBITDA over the last 12 months, we view Freshpet’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $2.73 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’ EPS expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its gross margin missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 2.8% to $72.46 immediately after reporting.

Updated: February 23, 2026 at 6:49 AM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Freshpet, you should also grasp the company’s longer-term business quality and valuation.

Freshpet isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was impressive 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 49.1x. At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $76.80 on the company (compared to the current share price of $72.46).