Pet stocks beat S&P500 by 48% in 2020; Freshpet up 127%

Investment bank Cascadia Capital follows an index of publicly traded pet industry stocks. The core group of Cascadia’s index beat the S&P 500 by 48% in 2020.

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(Michael Krinke | iStock.com)
(Michael Krinke | iStock.com)

Publicly traded pet food companies outperformed the S&P500 stock market index in 2020. Investment bank Cascadia Capital follows an index of publicly traded pet industry stocks. The core group of Cascadia‚Äôs index beat the S&P 500 by 48% in 2020. That pet food industry growth accelerated in the second half of 2020, over an incremental gain of 18% in the first half. Cascadia‚Äôs market analysts reviewed the performance of these pet food makers and retailers in their report ‚ÄúPet Industry Overview: Spring 2021.‚ÄĚ

Not all pet food companies fared equally in earnings per share, according to Cascadia’s analysis. Emerging, growth pet food stocks reflecting the value of growth in the public markets relative to earnings.

Pet food companies with strong equity growth in 2020:

Adjusted earnings for pet food industry companies in Cascadia‚Äôs index doubled during the past two years, while their price to earnings ratios expanded 28%. Most companies in the index had positive equity price appreciation, reflecting the durability of the sector during the ongoing pandemic. 

Overall, 2020 was the strongest year for Cascadia‚Äôs pet food industry index, post-Great Recession. Adjusted earnings grew 77.7% in 2020, compared to 27.6% in 2019. Revenue grew 10.0% in 2020, versus 7.7% in 2019, driven by 13.2% growth in the second half of 2020. 

Two examples of pet food companies during 2020

The story of pet food industry growth was more complex than simple overall expansion. In the reports, Cascadia presented the examples of Nestle Purina PetCare, FreshPet and J.M. Smucker. Purina posted 10.2% organic growth in 2020. This contributed to 6.2% annual CAGR for the last four years.  Growth in international markets drove this increase, while in the U.S., Purina‚Äôs market share contracted in all pet food and treat categories, with dog food down 181 bps, cat down 116 bp
 and treats down 57 bps.

By comparison, in the period ended Jan. 31. 2021,  the J.M. Smucker pet food division posted 4.1% growth, although profitability increased 0.1%, largely due to a legal settlement. Smucker pet profitability shrank 8.1% in the second half of 2020 after growing 9.4% in the first half. During the pandemic, Smucker cat foods gained market share, while dog foods lost ground. 

Refrigerated dog and cat food maker Freshpet saw 30% sales growth in 2020. E-commerce grew in importance for the company with online sales now represents 4.9% overall. Those online sales were divided into 55% click-and-collect, 34% last mile delivery and 11% online delivery. 

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