Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 25 Feb, 25 | FRPT | Buy | USD 100.22 | USD 108.0 | USD 116.92 | 2 days | 16.7% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Freshpet, Inc., together with its subsidiaries, manufactures, distributes, and markets natural fresh meals and treats for dogs and cats in the United States, Canada, and Europe. It sells dog food, cat food, and dog treats under the Freshpet brand name; and Dognation and Dog Joy labels through various classes of retail, including grocery, mass, club, pet specialty, and natural, as well as online. The company was incorporated in 2004 and is headquartered in Secaucus, New Jersey.
Strong Revenue Growth – Net sales grew 22.0% in Q4 2024 to $262.7 million and 27.2% for the full year to $975.2 million, driven by volume increases
Significant EBITDA Growth – Adjusted EBITDA surged 68% in Q4 2024, from $31.3 million to $52.6 million, and more than doubled for the full year, from $66.6 million to $161.8 million
Rising SG&A Costs – SG&A expenses increased to $92.2 million in Q4 2024 from $59.7 million in Q4 2023, and for the full year, they rose to $358.0 million from $281.3 million, impacting profitability
Higher Capital Expenditures – The company plans to spend $250 million in capital expenditures in 2025, which could strain cash flow in the short term.
Key investment risks for Freshpet include rising SG&A expenses, high capital expenditures, potential supply chain disruptions, and the need for sustained volume growth to maintain profitability
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 100.22 | 90.98 | 108.0 | 116.92 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Strong Revenue Growth and Profitability Improvements: Freshpet reported a 22.0% increase in net sales to $262.7 million in Q4 2024 and a 27.2% increase to $975.2 million for the full year. The revenue growth was primarily driven by volume gains of 20.7% in Q4 and 26.1% for the full year. The company also achieved positive net income of $46.9 million for 2024, compared to a net loss of $33.6 million in the prior year, marking a significant turnaround.
Improved Gross Margins and Operational Efficiencies: Gross margin improved from 34.6% to 42.5% in Q4 2024 and from 32.7% to 40.6% for the full year, driven by lower input costs, reduced quality costs, and improved plant expense efficiencies. Adjusted gross margin also increased to 48.1% in Q4 and 46.5% for the full year, reflecting operational improvements.
Higher Selling, General, and Administrative Expenses (SG&A): SG&A expenses rose to $92.2 million in Q4 2024, an increase from $59.7 million in the prior year period, with SG&A as a percentage of net sales increasing by 740 basis points to 35.1%. For the full year, SG&A was $358.0 million, up from $281.3 million, but remained consistent at 36.7% of net sales. The rise was attributed to higher media spending, share-based compensation, and variable compensation accruals.
Substantial Increase in Adjusted EBITDA: Adjusted EBITDA saw significant growth, reaching $52.6 million in Q4 2024, compared to $31.3 million in Q4 2023, and $161.8 million for the full year, up from $66.6 million in 2023. The improvement was largely due to higher adjusted gross profit, partially offset by increased SG&A expenses.
Strong Cash Flow and Balance Sheet Position: Freshpet reported $154.3 million in net cash provided by operating activities for 2024, an increase of $78.3 million year-over-year. As of December 31, 2024, the company had $268.6 million in cash and cash equivalents and $395.2 million in outstanding debt. The company plans to use its balance sheet to support long-term capacity expansion.
Positive Outlook and Long-Term Growth Targets: For 2025, Freshpet expects net sales between $1.18 billion and $1.21 billion, representing a 21% to 24% increase, and adjusted EBITDA of at least $210 million. Capital expenditures are projected at approximately $250 million. The company also revised its 2027 targets, raising its adjusted gross margin goal to 48% (previously 45%) and adjusted EBITDA margin to 22% (previously 18%), reflecting confidence in sustained growth and operational efficiencies.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Freshpet, Inc (NASDAQ: FRPT) at the current market price of USD 100.22, as on February 25, 2025 at 08:45 AM PST.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Defensive Industry: Packaged Foods
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| FRPT Freshpet Inc |
-0.12 0.14% | 83.05 | 653.45 | 104.17 | 6.84 | 5.50 | 7.00 | 130.70 |
| NSRGF Nestle SA |
- -% | 100.79 | 26.86 | 18.76 | 3.13 | 7.10 | 3.81 | 21.70 |
| NSRGY Nestle SA ADR |
0.71 0.70% | 101.87 | 26.82 | 18.66 | 3.18 | 7.07 | 3.81 | 21.70 |
| KHC Kraft Heinz Co |
-0.145 0.48% | 30.29 | 15.59 | 11.79 | 1.64 | 0.88 | 2.34 | 11.32 |
| DANOY Danone PK |
-0.07 0.46% | 15.24 | 28.42 | 16.39 | 1.44 | 2.23 | 1.85 | 12.41 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 25,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
This report has been issued by StockNextt which has an Ontario Business Identification Number 1000958347 and British Columbia registration Number FM1051529 is a trade name under Kalkine Canada Advisory Services Inc. having Business Number 761925130BC0001. Kalkine Canada Advisory Services Inc. and StockNextt are collectively referred to as “StockNextt”, “we”, “us”, and “our”. The website https://stocknextt.com and associated pages are published by StockNextt. The information in this report and on the StockNextt website has been prepared from a wide variety of sources, which StockNextt, to the best of its knowledge and belief, considers accurate. StcokNextt has made every effort to ensure the reliability of information contained in its reports, newsletters, and websites. All information represents our views at the date of publication and may change without notice. The information in this report does not constitute an offer to sell securities or other financial products or a solicitation of an offer to buy securities or other financial products. Our reports contain general recommendations for investing in securities and other financial products. StockNextt does not offer financial advice based upon your personal financial situation or goals, and we shall not be held liable for any investment or trading losses you may incur by using the opinions expressed in our reports, publications, market updates, news alerts and corporate profiles. StockNextt does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. StockNextt’s general advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested. Please also read our Terms and conditions for further information. Employees and/or associates of StockNextt and its related entities may hold an interest in the securities or other financial products covered in this report or on the StockNextt website. Any such employees and associates are required to comply with certain safeguards, procedures and disclosures as required by law.
Copyright © 2023 Krish Capital Pty Ltd. All rights reserved. No part of this website, or its content, may be reproduced in any form without our prior consent.
