Is Central Garden & Pet Company a Buy at Its Current Valuation?

Central Garden & Pet Company CENT is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 11.85X, which positions it at a discount compared with the industry's average of 16.71X. The question is whether this discounted valuation reflects underlying challenges or presents an opportunity to buy.

CENT shares have gained 10.8% over the past three months compared with the industry’s rise of 11.3%. CENT has outpaced the sector’s decline of 2.5% and the S&P 500 Index’s gain of 6.4% during the same period.

CENT Streamlines Portfolio and Boosts Innovation

Central Garden & Pet is looking forward to strengthening its position as one of the leading companies in the U.S. pet supplies and lawn and garden supplies space. The company is actively refining its portfolio to focus on high-growth, high-margin categories while exiting underperforming segments. Significant moves include the sale of its garden distribution business to the independent channel and a strategic exit from the pottery business.

Management is deliberately exiting or deemphasizing lower-margin, more volatile businesses, even at the expense of near-term reported sales. CENT attributed the fiscal 2025 sales decline to proactive actions to reduce exposure to lower-margin pet and garden durables and to exit U.K. operations, plus the transition of two third-party product lines in the garden distribution business to a direct-to-retail model.

A core pillar of Central Garden & Pet is the successful execution of its "Cost and Simplicity" program, spanning procurement, manufacturing, logistics, portfolio actions, and administrative efficiency. This has fundamentally improved the company's margin profile. In fiscal 2025, adjusted gross margin expanded 210 basis points to reach 32.1%. This gain is the direct result of a multi-year effort to streamline operations, including the closure of 16 legacy facilities and supply chain modernization.

CENT is accelerating channel shift toward e-commerce, which now accounts for 27% of Pet segment sales. The Garden segment also saw record e-commerce growth, contributing more than 10% of sales. The successful transition of product lines to direct-to-retail models and the expansion of digital capabilities ensure that Central Garden & Pet can quickly adapt to changing consumer behaviors and capture market share in online channels.

Despite market volatility and weather fluctuations, Central Garden & Pet’s core segments demonstrated remarkable resilience. The Garden segment achieved its biggest point-of-sale (POS) year on record, with notable share gains in Grass Seed, Fertilizer, and Wild Bird products. Meanwhile, the Pet segment maintained its overall market share, with specific gains in Dog Chews, Equine, and Flea & Tick categories.

Looking ahead, CENT expects fiscal 2026 adjusted earnings to be $2.70 or better. This guidance reflects management's confidence to drive margin expansion and operational excellence.

The Zacks Rundown for CENT

The Zacks Consensus Estimate for CENT’s current year and the next year sales estimates indicate year-over-year growth of 0.8% and 1.2%, respectively.

The Zacks Consensus Estimate for CENT’s current year and the next year earnings estimates indicate year-over-year growth of 1.1% and 4.7%, respectively.

How to Play CENT Stock?

Central Garden & Pet presents an attractive opportunity trading below the industry's average. The company is refining its portfolio, exiting weaker businesses and focusing on higher-quality categories while steadily improving efficiency, margins and digital capabilities. Its core pet and garden franchises are holding share and showing resilience despite external volatility. With its “Cost and Simplicity” program delivering tangible results, CENT appears well-positioned to drive sustainable profitability. For current investors, the improving operational discipline and clearer strategic focus support staying invested as the benefits of these actions continue to unfold. For potential investors, the stock offers an attractive entry point. At present, CENT carries a Zacks Rank #2 (Buy).

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

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