Freshpet’s Returns and Cash Profile Draw StockStory Caution

StockStory argued that Freshpet’s recent performance and cash returns make the stock less attractive. Over the six months covered in its analysis, shares gained 1%, while the S&P 500 rose 21.1%.

As of 16:00 UTC on Wednesday, Freshpet traded at $57.12, down 0.05% since the previous close. The article cited $1.18 billion in revenue over the past 12 months, describing Freshpet as a small consumer staples company with fewer distribution channels than larger rivals.

StockStory said Freshpet’s free cash flow margin averaged 2.4% over the past two years, which it viewed as weak for the sector. The publisher said that leaves the company with fewer opportunities to return capital to shareholders.

The article also said Freshpet’s five-year average return on invested capital was 0.6%, below the typical cost of capital for consumer staples companies. StockStory viewed this as evidence that past growth initiatives had not yet generated strong returns.

StockStory said Freshpet traded at 34.4 times forward earnings in the article and argued that the valuation reflected substantial optimism. It said it preferred a software stock but did not name it in the story.