Petco Health and Wellness Company Inc. shares traded at $3.45 each after the release of its first-quarter report, showing a 9.9% gain over the past six months, compared to a 5.5% rise in the S&P 500. Despite this, analysts warn of risks for investors.

The company’s same-store sales have remained flat for two years, reflecting weak demand growth in existing locations. Earnings per share have significantly declined over the past four years, while debt exceeds $2.92 billion against just $133.3 million in cash. The net debt-to-EBITDA ratio stands at 8×, indicating high leverage.

At the current 24.8× forward P/E valuation, experts see no significant growth potential and prefer to look at more promising investment opportunities.