Central Garden & Pet (CENT) Shares Plunge 7.20% Amid Revenue Decline

Central Garden & Pet (CENT) shares rose 0.41% today, marking the lowest level since May 2020, with an intraday decline of 7.20%.

The strategy of buying CENT shares after they reached a recent low and holding for 1 week showed a 37.6% return over the past 5 years, significantly outperforming the broader market's 13% return. This demonstrates the effectiveness of the strategy in capturing short-term price movements following lows, which is a testament to the strength of CENT's performance in such scenarios.

CENT's Recent Performance: CENT's recent earnings report highlights strong execution and continued progress, despite softer sales. The company reported a record non-GAAP operating income in its pet segment, driven by strong execution. The wild bird business experienced record sales, and the e-commerce sales performance remained robust.

Market Outperformance: The strategy's return of 37.6% over 5 years versus the market's 13% highlights its ability to outperform during this period. This is a testament to the effectiveness of the strategy in identifying opportunities in stocks like CENT that have the potential for short-term price appreciation following recent lows.

Statistical Validation: Backtesting over 41,000 scenarios reveals that traditional market axioms, such as a correlation between a stock's fundamentals and future performance, are often invalid. This strategy's success lies in unlearning such axioms and finding patterns that work for individual risk tolerance.

Risk Considerations: While the strategy shows strong returns, it's important to note the 54% chance of losing 1% and a 43% chance of gaining 2.5% over the same period. This highlights the strategy's volatility and the need for risk management considerations in real-world applications.

In conclusion, the strategy of buying CENT shares after they reached a recent low and holding for 1 week is a viable approach, given CENT's recent performance and the broader market outperformance. However, investors should be aware of the strategy's volatility and consider their risk tolerance and management strategies before implementing such a plan.

Central Garden & Pet has faced a challenging market environment over the past three years, with demand remaining weak. This has resulted in an annual sales decline of 2.4%, creating a poor baseline for future analysis. The company's struggles have been evident in its financial performance, which has failed to meet market expectations.

In the first quarter of 2025, Central Garden & Pet reported a significant decline in revenue, with sales dropping by 7.4% year over year to $833.5 million. This shortfall in revenue expectations has further exacerbated investor concerns about the company's financial health and future prospects. The decline in sales reflects broader market trends and internal challenges that the company is grappling with.