Chewy Inc (CHWY, Financial), a leading entity in the retail-cyclical sector, has demonstrated a remarkable performance in the stock market recently. With a current market capitalization of $9.45 billion and a significant price increase of 27.17% over the past week and 18.08% over the past three months, the company's financial health and growth trajectory are drawing considerable attention. The current stock price stands at $21.68, which, when compared to the GF Value of $45.1, indicates that the stock is significantly undervalued. This valuation presents a compelling case for potential investors, as the stock was also deemed significantly undervalued three months ago with a past GF Value of $49.82.
Overview of Chewy Inc
Founded in 2011 and later acquired by PetSmart in 2017, Chewy Inc has grown to become the largest e-commerce pet care retailer in the United States. In 2023, the company reported impressive sales of $11.2 billion, offering a wide array of products including pet food, treats, over-the-counter medications, and hard goods like crates and leashes. Chewy's business model, focused on high customer engagement and satisfaction, has allowed it to maintain a strong market presence. 
Assessing Profitability
Chewy's Profitability Rank currently stands at 5/10. Despite a negative operating margin of -0.21%, which is better than 28.96% of its peers in the industry, the company shows robust returns with an ROE of 11.57% and ROA of 1.39%, surpassing 67.43% and 44.2% of its industry counterparts, respectively. However, its ROIC of -1.87% indicates challenges in generating cash flow relative to capital invested, ranking better than only 24.84% of competitors. Chewy has been profitable for 2 out of the past 10 years, a metric that surpasses 9.12% of its peers. 
Growth Metrics
Chewy's Growth Rank is an impressive 7/10. The company has shown a consistent increase in revenue, with a 3-year revenue growth rate per share of 13.70% and a 5-year rate of 23.90%, outperforming 71.32% and 90.47% of companies in the industry, respectively. Looking ahead, Chewy's total revenue is expected to grow at an estimated rate of 7.40% over the next 3 to 5 years. Additionally, its 3-year EPS without NRI growth rate stands at a stellar 97.20%, better than 94.93% of its peers. The estimated future EPS growth rate is also high at 73.11%, surpassing 96.92% of competitors. 
Notable Shareholders
Chewy's stock is held by several notable investors. Baillie Gifford (Trades, Portfolio) is the largest, holding 19,819,195 shares, which accounts for 4.56% of the company's shares. Following them, Jim Simons holds 2,320,855 shares (0.53%), and Paul Tudor Jones (Trades, Portfolio) owns 1,078,268 shares (0.25%). These holdings reflect the confidence and interest from institutional investors in Chewy's business model and future prospects.
Competitive Landscape
Chewy operates in a competitive market, with key players like Vipshop Holdings Ltd (VIPS, Financial) with a market cap of $8.66 billion, Etsy Inc (ETSY, Financial) valued at $7.03 billion, and Maplebear Inc (CART, Financial) at $8.39 billion. These companies, similar in market capitalization, also compete in the retail-cyclical sector, each with unique strategies and market positions.
Conclusion
Chewy Inc's recent stock performance, coupled with its solid profitability and growth metrics, underscores its potential in the competitive e-commerce pet care market. Despite some challenges in cash flow generation, the company's market position and future revenue prospects make it an attractive option for investors. The significant undervaluation based on GF Value further suggests that the stock might be poised for future appreciation, making it a noteworthy consideration for value investors.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
