Should I follow Hargreaves Lansdown investors and buy FTSE 250 Stock Pets at Home?

Last Wednesday (November 27), FTSE 250 stock Pets at Home (LSE: PETS) is down 17%. This led to more buying by investors, and the stock popped Hargreaves LansdowneList of the most bought stocks of the week.

Should I follow the crowd and buy pet care stocks for my portfolio? Let’s talk.

What caused the crash?

The share price crash last week could be attributed to a disappointing set of half-year results.

In H1 (the 28 weeks ending 10 October), the group’s revenue increased by 1.9% to £789.1m. Meanwhile, revenue from its retail division (which makes up the bulk of revenue) grew by 0.1% to £696.3m.

Looking ahead, the company said it expects the pet retail market to remain stable “generally recommended” until the end of the financial year. As a result, it is only waiting “polite” year-on-year growth in underlying profit before tax for FY25.

It is worth noting that the results of H1 were not negative. Another highlight was the 18.6% revenue growth in the company’s veterinary division. Another was a 43% jump in free cash flow. Turning to earnings per share, it rose 13.5% to 8.4p.

Overall, however, investors were not impressed.

A case of bull

Looking at the stock today, I definitely see reasons to be bullish.

First, the price is now very low. For the financial year ending 30 March 2026, the EPS forecast is 22.8p, so we have a forward price-to-earnings (P/E) ratio of just 10.3 at the moment.

One person who clearly sees the value of that income is CEO Lyssa McGowan. On 28 November, he bought £100k worth of shares at a price of £2.36 per share.

Second, the dividend yield now looks good. With analysts expecting a payout of 14p per share for the next financial year, the yield rose to around 6%.

Additionally, the company is seeing good growth from its animal division and its app. And management expects conditions in the UK pet care market to pick up in the medium term.

Bear bag

However, there are also a few issues that concern me.

Another is rising costs. In the next financial year, the company expects costs to rise by around £18m due to increases in the National Living Wage and National Insurance contributions and this could hit profits.

Another competition. These days, I often buy food for my dog Amazon. I found it had a better selection than Pets at Home (and better prices).

A third factor to consider is that the Competition and Markets Authority (CMA) is looking at how pet supplies are bought and sold amid concerns that pet owners may not be getting the best deal. This adds some uncertainty.

Finally, it is worth highlighting the long-term share price chart. Over the past 10 years, this stock has gone nowhere.

That’s troubling, especially considering that the global pet care market has exploded over the past decade. To me, it suggests that the company has some flaws.

Should I buy?

If I rate everything, I will transfer the shares of pets to the Home for now.

There’s certainly a chance they could be a decent investment, but to me, the company doesn’t have enough of a competitive advantage.