After spending time in the doghouse, stocks that cater to pet owners are starting to bounce back. Shares of Rover (ROVR) and Freshpet (FRPT 1.52%) are beating the market in 2023, and Chewy (CHWY -2.23%) is bouncing back in a major way this week after a blowout financial update.

It was easy to buy into pet stocks in early 2020 when we were bracing for the beginning of the COVID-19 crisis. Pet adoptions spiked when folks realized that they would be hunkering at home for the long haul, setting the stage for years of growth as new puppies and kittens would mature into active and hungry members of the family. 

Reality hasn't been as kind. Many companies have posted uninspiring results after the initial surge. Momentum could be starting to turn. Chewy's stock soared 22% on Thursday after posting better-than-expected fiscal first-quarter results. Rover and Freshpet are both already beating the market in 2023. Let's take a closer look at these three pet stocks that appear worthy of being tapped as best in show.

1. Rover

There are plenty of trends working in favor of Rover, the leading app that connects pet owners with sitters, walkers, and boarding solutions. Many pet-related stocks experienced an initial boom when pet adoptions started, but it wasn't time for Rover to shine. Folks were stuck at home. There was no need to pay others to take care of their dogs and cats. 

Rover is an ideal reopening play. Pet owners are traveling again, leaning on Rover's platform to find boarders or vetted individuals willing to do wellness checks in their absence. Companies are starting to call their employees back to in-office work in 2023, and that means more people that will want to pay to have folks checking in on their cats or walking their dogs when they're away from home. 

A dog resting in front of a calculator and money.

Image source: Getty Images.

Rover's first-quarter numbers were impressive last month. Revenue soared 48%. Total bookings during the first three months of this year rose 27% to 1.5 million, and gross booking value increased 36%. Rover also raised its guidance. Making the most of its scalable model, Rover is finally expected to turn profitable this year. 

The humanization of pets is another trend working in Rover's favor. People are treating dogs and cats as members of the family. If you can't take your pet with you, leaning on Rover to make sure your new family member is being well taken care of is essential. Rover stock is trading for less than half of where it was when it hit the market in 2021, but that bite is getting ready to bark.

2. Freshpet

The company offering fresh and refrigerated pet food in branded coolers at a supermarket or mass market retailer near you is humming along nicely. Net sales rose 27% in last month's first-quarter report, as 14% in volume growth and 15% price mix increase delivered a 29% year-over-year pop in dollar-based consumption.

Freshpet's market penetration has nearly doubled to approach 10 million households in the last four years. Growth at Freshpet has never been a problem. Revenue growth has accelerated for six consecutive years. Stretching the streak to seven years will be challenging, but now we're seeing the bottom line carrying the growth batons with margins widening in this kind of operating climate. 

The great thing about Freshpet is that once you upgrade your pet's diet to fresh food, you're not going back to dry kibble. Freshpet is the one brand that's available at most local grocery stores. Consumers will cut corners if the economy starts to soften, but they're not going to downgrade the food they're serving their dogs and cats. Freshpet should continue to widen its presence in feeding dishes. 

3. Chewy

Chewy came through in a major way this week. Net sales for the fiscal quarter ending in April rose 14.7% to hit $2.78 billion, its healthiest top-line increase in more than a year. The bottom line was even better, as it posted an adjusted profit of $0.20 a share, and reported profit of $0.05 a share. Analysts were bracing for a quarterly loss.

There are positive developments nearly everywhere you look. Net active customers improved sequentially. It posted nearly as much in free cash flow for the fiscal first quarter as it did through the three previous fiscal years combined. 

Chewy also boosted its guidance, and not just by the amount of the first-quarter beat. Its outlook for the current quarter is also above where Wall Street targets were heading into the earnings announcement. Momentum is starting to turn positive for pet food stocks, and other companies taking advantage of the rise in pet ownership and our increasing need to pamper our furry friends. It's time to step out of the doghouse and start sinking your teeth into some of the winners.