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Freshpet (FRPT - Free Report) , a Zacks Rank #5 (Strong Sell) stock, is a pet food company that manufactures and markets food options for dogs and cats. FRPT provides meat-based products such as chicken and beef; vegetable products such as carrots and leafy greens; and high-fiber products such as brown rice and oats. The company makes natural fresh foods, refrigerated meals, and a variety of treats. It sells its products under the Freshpet, Dognation, and Dog Joy brand names. Freshpet was incorporated in 2004 and is headquartered in Secaucus, NJ.
Freshpet is part of the Zacks Food – Miscellaneous industry group, which currently ranks in the bottom 21% out of approximately 250 industry groups. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months. Note the unfavorable characteristics for this group below:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industry groups can often represent solid potential short candidates. While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies. Freshpet is fighting an uphill battle and the stock is confirming this notion as it continues to make a series of lower lows.
Weak Foundation: A History of Earnings Misses
FRPT has missed earnings estimates in 15 out of the past 17 quarters – not exactly the type of trend bulls like to see. The pet food company most recently reported Q4 EPS back in February of $-0.21, missing the $-0.14 consensus estimate by -50%. FRPT posted a loss of 8 cents in the same quarter a year ago.
The company is not only consistently missing EPS estimates, they are doing so by a wide margin. FRPT has posted an average miss of -401.19% over the last four earnings announcements.
FRPT also fell short of Q4 sales estimates in which the company delivered revenues of $115.87 million, slightly missing the consensus by -0.32%. Freshpet has topped revenue estimates just once in the past four quarters.
Deteriorating Forecasts
Analysts have decreased earnings estimates across the board. The current quarter’s estimate has declined -125% to $-0.36, which would represent a -38.46% regression versus the same quarter last year. Q2 estimates have fallen -150% to $-0.10.
For the year, analysts have slashed 2022 EPS estimates by -311.11% to $-0.37. Falling earnings estimates are always a concern, but a decline of this magnitude is a big red flag. If the company continues its recent streak of earnings misses, more pain will likely be ahead for the stock.
Technical Outlook
As illustrated below, FRPT is in a sustained downtrend. Notice how the stock plunged below both the 50-day (blue line) and 200-day (green line) moving averages and is making a series of lower lows. It’s also important to point out that both moving averages are sloping downward – a good sign for the bears.
Image Source: StockCharts
The death cross, a technical pattern in which a stock’s 50-day moving average crosses below the longer-term 200-day moving average, occurred late last year. The stock has fallen over 45% in the past year and is showing no signs of a bottom.
Even with the recent decline, Freshpet is relatively overvalued, irrespective of the metric used:
Image Source: Zacks Investment Research
Bottom Line
With a history of earnings misses and a strong technical downtrend, the odds aren’t exactly in FRPT’s favor.
Our Zacks Style Scores depict a weakening outlook for this stock, as FRPT is rated a worst-possible ‘F’ in our overall VGM category. A worsening fundamental and technical backdrop show that this stock is fighting an uphill battle. The fact that FRPT is a component in one of the worst-performing industry groups simply adds to the list of growing concerns.
Falling future earnings estimates are a big red flag and need to be respected. These will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors should only think about including this stock in their portfolio as part of a hedge or short strategy. Bulls will want to steer clear of an overvalued FRPT until the situation shows drastic signs of improvement.
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Bear of the Day: Freshpet, Inc. (FRPT)
Freshpet (FRPT - Free Report) , a Zacks Rank #5 (Strong Sell) stock, is a pet food company that manufactures and markets food options for dogs and cats. FRPT provides meat-based products such as chicken and beef; vegetable products such as carrots and leafy greens; and high-fiber products such as brown rice and oats. The company makes natural fresh foods, refrigerated meals, and a variety of treats. It sells its products under the Freshpet, Dognation, and Dog Joy brand names. Freshpet was incorporated in 2004 and is headquartered in Secaucus, NJ.
Freshpet is part of the Zacks Food – Miscellaneous industry group, which currently ranks in the bottom 21% out of approximately 250 industry groups. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months. Note the unfavorable characteristics for this group below:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industry groups can often represent solid potential short candidates. While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies. Freshpet is fighting an uphill battle and the stock is confirming this notion as it continues to make a series of lower lows.
Weak Foundation: A History of Earnings Misses
FRPT has missed earnings estimates in 15 out of the past 17 quarters – not exactly the type of trend bulls like to see. The pet food company most recently reported Q4 EPS back in February of $-0.21, missing the $-0.14 consensus estimate by -50%. FRPT posted a loss of 8 cents in the same quarter a year ago.
The company is not only consistently missing EPS estimates, they are doing so by a wide margin. FRPT has posted an average miss of -401.19% over the last four earnings announcements.
FRPT also fell short of Q4 sales estimates in which the company delivered revenues of $115.87 million, slightly missing the consensus by -0.32%. Freshpet has topped revenue estimates just once in the past four quarters.
Deteriorating Forecasts
Analysts have decreased earnings estimates across the board. The current quarter’s estimate has declined -125% to $-0.36, which would represent a -38.46% regression versus the same quarter last year. Q2 estimates have fallen -150% to $-0.10.
For the year, analysts have slashed 2022 EPS estimates by -311.11% to $-0.37. Falling earnings estimates are always a concern, but a decline of this magnitude is a big red flag. If the company continues its recent streak of earnings misses, more pain will likely be ahead for the stock.
Technical Outlook
As illustrated below, FRPT is in a sustained downtrend. Notice how the stock plunged below both the 50-day (blue line) and 200-day (green line) moving averages and is making a series of lower lows. It’s also important to point out that both moving averages are sloping downward – a good sign for the bears.
Image Source: StockCharts
The death cross, a technical pattern in which a stock’s 50-day moving average crosses below the longer-term 200-day moving average, occurred late last year. The stock has fallen over 45% in the past year and is showing no signs of a bottom.
Even with the recent decline, Freshpet is relatively overvalued, irrespective of the metric used:
Image Source: Zacks Investment Research
Bottom Line
With a history of earnings misses and a strong technical downtrend, the odds aren’t exactly in FRPT’s favor.
Our Zacks Style Scores depict a weakening outlook for this stock, as FRPT is rated a worst-possible ‘F’ in our overall VGM category. A worsening fundamental and technical backdrop show that this stock is fighting an uphill battle. The fact that FRPT is a component in one of the worst-performing industry groups simply adds to the list of growing concerns.
Falling future earnings estimates are a big red flag and need to be respected. These will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors should only think about including this stock in their portfolio as part of a hedge or short strategy. Bulls will want to steer clear of an overvalued FRPT until the situation shows drastic signs of improvement.