Chewy Inc (CHWY, Financial), a leading entity in the cyclical retail industry, has demonstrated a remarkable stock performance recently. With a current market capitalization of $9.69 billion and a significant price increase of 28.00% over the past week and 20.24% over the past three months, the company's financial health appears robust. Currently, the stock is priced at $22.23, which, when compared to the GF Value of $42.13, indicates that the stock is significantly undervalued. This valuation presents a compelling entry point for investors, considering the stock's previous GF Value was higher at $49.99, maintaining its status as significantly undervalued.
Company Overview
Founded in 2011 and public since 2019, Chewy Inc stands as the largest e-commerce retailer dedicated to pet care in the United States. The company, which was acquired by PetSmart in 2017, has flourished under its guidance before re-emerging as an independent entity. Chewy's extensive product range includes pet food, treats, medications, and essential hard goods like crates and leashes, generating a staggering $11.2 billion in sales in 2023. This broad offering ensures it meets the comprehensive needs of pet owners, solidifying its market position.
Assessing Profitability
Despite a modest Operating Margin of 0.15%, which ranks better than 30.76% of 1,112 companies in the same sector, Chewy's financial metrics suggest a nuanced picture of its profitability. The company's ROE stands at an impressive 19.22%, outperforming 81.63% of its peers. Additionally, its ROA of 2.82% and ROIC of 1.31% further demonstrate its ability to generate earnings relative to its equity, assets, and invested capital. However, with only two profitable years over the past decade, its Profitability Rank remains a modest 4/10.
Growth Trajectory
Chewy's growth metrics are particularly strong, with a Growth Rank of 8/10. The company has achieved a 13.70% 3-year revenue growth rate per share, surpassing 70.87% of its industry counterparts. Its 5-year revenue growth rate per share stands even higher at 23.90%, better than 90.48% of competitors. Looking ahead, Chewy is projected to maintain a healthy total revenue growth rate of 7.40% over the next 3 to 5 years. Moreover, its EPS growth has been remarkable, with a 97.20% growth over the past three years and an estimated future growth of 73.11% in the next 3 to 5 years, positioning it well above industry averages.
Investor Confidence
Chewy's stock is held by notable investors, which underscores confidence in its business model and growth prospects. Baillie Gifford (Trades, Portfolio) holds a significant 4.56% share, amounting to 19,819,195 shares. Renowned investor Jim Simons holds 2,320,855 shares, representing a 0.53% stake, while Paul Tudor Jones (Trades, Portfolio) owns 1,078,268 shares, making up 0.25% of the shares.
Competitive Landscape
Chewy operates in a competitive sector, with key players like Vipshop Holdings Ltd (VIPS, Financial) with a market cap of $8.88 billion, Etsy Inc (ETSY, Financial) valued at $7.45 billion, and Maplebear Inc (CART, Financial) at $8.07 billion. Despite the stiff competition, Chewy's unique market positioning and robust growth metrics provide it with a competitive edge in the e-commerce pet care industry.
Conclusion
In conclusion, Chewy Inc's recent stock performance and growth trajectory highlight its strong market position and potential for future growth. The company's current valuation suggests that it is significantly undervalued, making it an attractive option for investors looking for growth in the retail-cyclical sector. With solid financials, a comprehensive product range, and a strategic market position, Chewy is well-equipped to continue its upward trajectory amidst competitive pressures.
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.
