Pet Valu Holdings (TSX:PET) is my top Canadian stock pick right now. It is down 53% from its all-time highs, yet the underlying business is growing, profitable, and built to last. This is the kind of setup long-term investors should get excited about.
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Why Pet Valu stock is practically perfect
Pet Valu is Canada’s largest pet specialty retailer. The company operates 863 stores coast to coast, nearly four times as many locations as its nearest pet specialty competitor.
It sells food, treats, toys, accessories, and wellness products for dogs, cats, fish, birds, reptiles, and small animals. It also offers in-store services like self-serve dog washes, grooming salons, and live animal adoption programs.
The TSX dividend stock has been under pressure for one reason: the broader slowdown in Canadian consumer spending. Pet lovers are still shopping, but they are hunting for value.
Pet Valu sharpened its everyday pricing on key products, especially through its proprietary brands, such as the Performatrin line. These products cost less for shoppers but generate about 1,200 basis points more margin for Pet Valu than comparable national brands.
In 2025, proprietary brand unit penetration grew by roughly 200 basis points and is expected to increase in 2026.
Is this TSX stock a good buy?
In 2025, Pet Valu grew sales by 5% on a comparable 52-week basis. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margins held steady at 22%.
Free cash flow in 2025 topped $104 million, and the company returned a record $121 million to shareholders through share buybacks and dividends.
Same-store sales in Q4 grew just 0.3%, held back by intense promotional activity from competitors and value-seeking consumers.
However, units per transaction reached a multi-year high, and loyalty program penetration reached an all-time high of 88% among more than three million active members. Notably, online sales continued to outpace company averages.
Chief Executive Officer Greg Ramier summed it up well on the earnings call: “We continue to gain share, primarily from pet specialty peers as we win the monthly shop through a compelling consumables offering and value.”
Pet Valu completed a major supply chain transformation in 2025, increasing its throughput per labour hour by 60% from pre-transformation levels.
Distribution costs are declining, and management is now turning its attention to further labour and transportation efficiencies, setting up a long runway of productivity gains.
In 2026, Pet Valu plans to open approximately 40 new stores, continuing a track record of disciplined expansion.
It plans to keep growing its franchise network, rolling out its enhanced culinary experience to roughly 40 franchise locations, and leaning deeper into digital channels like AutoShip, Click and Collect, DoorDash, and Uber Eats.
For the full year, management is guiding for revenue growth of 2% to 4%, flat to 2% same-store sales growth, flat to slight expansion in adjusted EBITDA margins, and mid- to high-single-digit growth in adjusted earnings per share, all on a comparable 52-week basis.
The Board also approved an 8% increase in the quarterly dividend to $0.13 per share, marking five consecutive years of dividend growth.
Is the TSX stock undervalued?
Analysts forecast Pet Valu to expand its free cash flow from $104 million in 2025 to almost $200 million in 2030. If the TSX stock is priced at 10 times forward FCF, it could return 62% within the next four years. After adjusting for dividends, cumulative returns could surpass 70%.
Buying a great business at a steep discount is one of the oldest rules in investing. Pet Valu is Canada’s category leader in pet retail, with a fortress balance sheet, growing free cash flow, and a shareholder-friendly capital allocation strategy.
