PetMed Express (PETS) is built around an appealing concept—capitalizing on the rapidly growing pet ownership trend by offering pet medications and health products through an online platform. In theory, the company is well positioned in a market where pet spending continues to rise. However, its execution has failed to keep pace with industry growth, and the stock’s sharp decline over the past two years reflects a business struggling to maintain momentum.

Sales and earnings have been on a steady decline, and analysts have consistently lowered earnings estimates, signaling deteriorating fundamentals. Despite this weakness, the stock still trades at a surprisingly high relative valuation, making it an even less attractive option for investors. Without a clear turnaround in revenue growth and profitability, PETS remains a stock to avoid until its fundamentals show signs of meaningful improvement.

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PETS Struggles with Falling Sales and Earnings Downgrades

PetMed Express has been caught in a multi-year sales decline, and the outlook remains bleak. Annual revenue has been shrinking for the last three years, and analysts expect this trend to continue. Sales are projected to decline by 18.6% this year and another 6.8% next year, indicating persistent weakness in the company’s ability to generate growth.

Earnings expectations have also been consistently revised lower, further underscoring PetMed’s deteriorating fundamentals. In just the past month, analysts have cut their estimates for the current quarter by 20%, while full-year 2025 earnings forecasts have been slashed by 20.8%. The company now holds a Zacks Rank #5 (Strong Sell) rating, reflecting its unfavorable earnings trajectory.

The outlook for profitability is even more concerning, with earnings projected to plummet by 84% over the next year. With sales momentum fading and margins under pressure, the company faces significant hurdles to reversing its downward trajectory.

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PetMed Express Valuation May Still be too High

Despite its ongoing struggles, PetMed Express continues to trade at a surprisingly high valuation. The stock currently carries a one-year forward earnings multiple of 21.1x, which is in line with the broader market. However, given the company's deteriorating fundamentals this valuation appears difficult to justify and could further increase the downside risk in the stock.

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Should Investors avoid PETS Stock?

With declining sales, shrinking earnings, and ongoing analyst downgrades, PetMed Express faces significant challenges that show no signs of easing. The company’s inability to capitalize on the booming pet care industry raises concerns about its long-term viability, especially as competition intensifies from larger e-commerce players and traditional pet retailers.

Despite these headwinds, PETS continues to trade at a valuation that appears too high given its weak fundamentals, making it even less attractive for investors. Until the company can stabilize its business, improve profitability, and regain earnings momentum, there is little reason to take a chance on this struggling stock. For now, PETS remains a stock to avoid, as further downside risk appears likely.

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This article originally published on Zacks Investment Research (zacks.com).

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