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Petco is a leveraged turnaround, not a growth story. Revenue has declined three straight years ($6.26B FY2024 → $6.12B FY2026… → $5.96B FY2026, -2.5% YoY), which is the core problem: this is a low-margin specialty retailer being squeezed between Chewy/Amazon online and Walmart/Costco on price, and the MD&A offers no revenue catalyst — it leans on 'comparable sales' and a membership push while flagging tariffs, inflation and supply-chain pressure it 'cannot predict.' On the flip side, the operating turnaround is genuine: operating income swung to $120M from near-zero (+1,608%), the company clawed back to a $9.07M net profit after a -$1.28B FY2024 and -$102M FY2025, and operating cash flow jumped 77% to $314M against $127M capex — roughly ~$187M of free cash flow versus a $732M market cap. Cash grew 55% to $257M while long-term debt fell to $1.49B.

Valuation is where it gets interesting. At $2.62 the equity trades at 0.1x sales, and on an enterprise basis (~$1.96B EV vs. ~$317M EBITDA using $120M operating income + $197M D&A) it's near ~6x EV/EBITDA — cheap, not distressed. The 87x P/E is a meaningless artifact of a $0.03 EPS. So a lot of pessimism is already priced in, and the FCF supports continued deleveraging, which is the single most important lever for a stock this levered.