Everyone and Their Dog Should Buy This Cheap TSX Stock

Canadian investors should be drooling at the prospect of adding a cheap TSX stock with the potential of Pet Valu Holdings Ltd. (TSX:PET).

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Senior Man Sitting On Sofa At Home With Pet Labrador Dog

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The S&P/TSX Composite Index plunged 228 points on Tuesday, May 30. Every single major sector on the TSX finished the day in the red. May has been a tough month for the Canadian market, but this should spur investors to take advantage of opportunities rather than shrink in the face of adversity. Today, I want to look at a cheap TSX stock that every Canadian should be chomping at the bit to get a piece of: Pet Valu (TSX:PET). Let’s get into why you should be excited to own this stock for the long haul.

Here’s how this cheap TSX stock has performed so far in 2023

Pet Value is a Markham-based company that is engaged in the retail and wholesale of pet foods, treats, toys, apparel, and accessories in Canada. Shares of this TSX stock have plunged 14% month over month as of close on May 30. The stock is now down 20% so far in 2023. Investors can see more of Pet Valu’s performance with the interactive price chart below.

Why I’m wagging my tail thinking about the pet care market!

The COVID-19 pandemic spurred a behavioural shift in many key areas. One unforeseen consequence of the pandemic and the subsequent lockdowns was a huge spike in pet ownership. This may have been fueled by the long periods of isolation that the population was forced to suffer through in most parts of the world. A survey in November 2020 by Narrative Research revealed that 18% of pet owners reported that they had obtained a new pet since the start of the pandemic.

Fortune Business Insights valued the global pet care market at US$235 billion in 2022. The report projected that this market would deliver a compound annual growth rate (CAGR) of 5.9% through to 2030, hitting a total of US$368 billion in value by the end of the projected period. Meanwhile, the market researcher Petfood Industry valued the global pet care market at US$179 billion in 2021. It projected that the market would achieve a CAGR of 6.8% from 2022 through to 2030.

Should investors be happy with Pet Valu’s recent earnings?

This company released its first-quarter (Q1) fiscal 2023 earnings on May 9. Pet Valu reported system-wide sales growth of 18% to $339 million. Meanwhile, revenues increased 17% year over year to $250 million. Gross profit jumped 13% year on year to $10.1 million. Moreover, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed 4.3% to $48.8 million. Overall, Pet Valu started strong in fiscal 2023 with strong sales growth and margins fell within management’s expectations.

Pet Valu also revealed its outlook for the rest of fiscal 2023. The company forecasts revenue between $1.05 billion and $1.07 billion, powered by same-store sales growth in the 7-10% range as well as 40-50 new store openings. Pet Valu also expects adjusted EBITDA between $230 million and $237 million for the full year.

Pet Valu: Why this TSX stock is a buy today

Shares of this TSX stock currently possess a favourable price-to-earnings ratio of 23. The Relative Strength Index (RSI) is a technical indicator that measures the price momentum of a given security. This TSX stock last had an RSI of 20. That puts Pet Valu well into technically oversold territory. Now is a terrific opportunity to snatch up this TSX stock that looks dirt cheap in the final days of May.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Pet Valu. The Motley Fool has a disclosure policy.

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