CENT

We rate CENTRAL GARDEN & PET CO (CENT) as a Buy with a composite score of 69.6/100 at a current price of $39.87. The stock scores above average across the majority of our six quantitative factors and ranks #106 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (95th percentile) and quality (84th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (46/100), Low uncertainty, and Standard capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

CENTRAL GARDEN & PET CO holds a top-quartile position (#3 of 50) within the Wholesale Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 69.6/100 places it at rank #106 in our full 7,333-stock universe. At $2.1B in market capitalization, CENTRAL GARDEN & PET CO is a mid-cap player in the Wholesale Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -31% combined with momentum at the 48th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 33% (+10.0pp vs sector) narrow to operating margins of 10% (+6.6pp vs sector) and net margins of 6.7%, yielding a gross-to-net conversion rate of 21%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $39.87, CENTRAL GARDEN & PET CO appears undervalued relative to its fundamentals. Our value factor score of 95/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 10.0x (a 48% discount to the sector median of 19.1x), EV/EBITDA of 10.2x (at a premium), P/B of 1.6x, P/S of 0.7x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to CENTRAL GARDEN & PET CO. The company exhibits strong financial stability with a beta of 0.57, and a stability factor in the 75th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.57 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 75th percentile and quality factor at the 84th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (75th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate CENTRAL GARDEN & PET CO's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 15.7%, and the balance sheet is managed within acceptable parameters (D/E: 76%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; CENTRAL GARDEN & PET CO falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, CENTRAL GARDEN & PET CO receives a Buy rating with a composite score of 69.6/100 (rank #106 of 7,333). Our quantitative framework assigns a Narrow Moat (46/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 73/100.

Our analysis supports a constructive view on CENTRAL GARDEN & PET CO. The combination of identifiable competitive advantages, low uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.