At US$4.91, Is It Time To Put Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) On Your Watch List?

Petco Health and Wellness Company, Inc. (NASDAQ:WOOF), might not be a large cap stock, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on Petco Health and Wellness Company’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Petco Health and Wellness Company

What Is Petco Health and Wellness Company Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 11% below our intrinsic value, which means if you buy Petco Health and Wellness Company today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $5.50, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Petco Health and Wellness Company’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Petco Health and Wellness Company generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 96% over the next year, the near-term future seems bright for Petco Health and Wellness Company. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in WOOF’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on WOOF, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Petco Health and Wellness Company at this point in time. Case in point: We've spotted 2 warning signs for Petco Health and Wellness Company you should be aware of.

If you are no longer interested in Petco Health and Wellness Company, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.