Does Central Garden & Pet's Recent Product Expansion Signal a Value Opportunity in 2025?

• If you have ever wondered whether Central Garden & Pet is a hidden gem or just fairly priced, you are in the right place for a fresh take on its value story.
• The stock has seen some positive momentum lately, climbing 2.8% over the last week and 6.8% in the past month. However, it is still down 17.2% year-to-date.
• What is behind these moves? Recent headlines have centered on Central Garden & Pet expanding its product lines and announcing new partnerships, fueling investor optimism even as broader market sentiment remains mixed.
• On our valuation scorecard, Central Garden & Pet earns a 4 out of 6 for being undervalued. Here is what that means and why savvy investors might want an even more nuanced look by the end of this article.

Find out why Central Garden & Pet's -15.6% return over the last year is lagging behind its peers.

Approach 1: Central Garden & Pet Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is worth by projecting its expected future cash flows and discounting them back to today’s value. This approach attempts to answer what Central Garden & Pet (NasdaqGS:CENT) could be worth, based on its ability to generate cash in the years ahead.

Central Garden & Pet’s most recently reported free cash flow stands at $306 million. Analysts have offered detailed forecasts up to five years out, projecting free cash flow in 2027 of $88 million. After that, Simply Wall St extrapolates further, with the estimated free cash flow for 2035 falling to around $20 million. Such long-range figures come with significant uncertainty.

Based on these projections, the DCF model calculates an intrinsic value of $9.02 per share. Compared to the actual share price, this implies Central Garden & Pet is trading at a 250.1% premium to its DCF value. This suggests the stock is substantially overvalued if these long-range cash flow estimates are accurate.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Central Garden & Pet may be overvalued by 250.1%. Discover 872 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Central Garden & Pet.

Approach 2: Central Garden & Pet Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like Central Garden & Pet, as it compares the market price of the stock to its underlying earnings. A lower PE can signal a stock is undervalued relative to its profitability, while a higher PE may indicate investor optimism or premium growth expectations.

When deciding what a “normal” PE ratio should be, investors consider both future growth potential and risks. Higher expected earnings growth or lower risk profiles justify higher PE ratios, while companies facing challenges or volatility tend to trade at lower multiples.

Central Garden & Pet is currently trading at a PE ratio of 14.3x. For context, the average PE for its peers is 18.4x, while the broader Household Products industry average sits at 17.9x. On the surface, this suggests that Central Garden & Pet is valued more conservatively than many of its competitors.

Rather than relying solely on comparison with industry or peers, Simply Wall St’s proprietary “Fair Ratio” uses a more nuanced approach. This metric incorporates key company attributes such as earnings growth, profitability, market risk, presence within the industry, and market capitalization to arrive at a tailored benchmark. Central Garden & Pet's Fair Ratio is currently 17.6x. This approach accounts for company-specific dynamics that simple averages can miss.

Comparing the Fair Ratio of 17.6x to Central Garden & Pet’s actual multiple of 14.3x shows the stock is trading below what would be considered fair value for its profile. This suggests there could be some hidden value for investors willing to look beyond the headline.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1402 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Central Garden & Pet Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is an investing tool that lets you define your own story behind a company by combining your expectations on future revenue, earnings, and margins with your big-picture perspective on what will drive results.

Think of it as connecting the dots. You start with what you believe about Central Garden & Pet’s strengths and risks, translate these beliefs into a custom financial forecast, and arrive at your own fair value estimate. Rather than only looking at the numbers, Narratives capture the reasoning and outlook behind them, making your investment thesis visible and actionable.

Anyone can use Narratives on Simply Wall St’s Community page, where millions of investors build and update views as new information, like earnings or industry news, emerges. Narratives are not static; they adapt in real time, so your outlook and fair value automatically update when new data arrives.

For example, some investors see Central Garden & Pet’s focus on premium, sustainable pet products and e-commerce as a catalyst for higher margins and price targets (like $50.00 per share). Others caution that supply chain challenges and industry risks could limit gains, targeting around $35.00 per share. By making your Narrative, you clarify your assumptions and compare your fair value to the current share price, helping you decide when to buy, hold, or sell.

Do you think there's more to the story for Central Garden & Pet? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com