Chewy Inc (CHWY, Financial), a leading e-commerce pet care retailer in the United States, has demonstrated a remarkable stock performance in recent months. With a current market capitalization of $12.28 billion and a stock price of $28.18, Chewy has seen a significant uptick. Over the past week alone, the stock has gained 6.95%, and over the last three months, it has surged by an impressive 71.21%. This growth is underscored by the GF Value of $42.21, indicating that the stock is significantly undervalued. This valuation presents a compelling case for potential investors, suggesting that Chewy's current market price may still offer a substantial upside.
Understanding Chewy's Business Model
Founded in 2011 and later acquired by PetSmart in 2017, Chewy has grown to become the largest e-commerce retailer of pet-related products in the U.S. The company offers a wide array of products, including pet food, treats, medications, and hard goods like crates and leashes. In 2023, Chewy reported sales of $11.2 billion, a testament to its robust business model and its ability to tap into the growing trend of pet ownership and increased spending on pet care.
Assessing Profitability and Operational Efficiency
Despite its impressive growth trajectory, Chewy's Profitability Rank stands at 4/10. The company's operating margin is currently at 0.15%, which is better than 30.77% of its peers in the industry. However, it shines in other profitability metrics such as Return on Equity (ROE) and Return on Assets (ROA), with figures of 19.22% and 2.82% respectively, positioning it well above the median in its sector. These figures indicate a strong capacity to generate profits relative to its equity and assets, despite the low operating margin.
Growth Prospects and Future Outlook
Chewy's Growth Rank is an impressive 7/10, reflecting its robust revenue and earnings performance over the past few years. The company has maintained a 3-year revenue growth rate per share of 13.70% and a 5-year rate of 23.90%, both of which are significantly higher than the majority of its peers. Looking ahead, Chewy is projected to sustain a total revenue growth rate of 7.40% over the next 3 to 5 years. Additionally, its EPS growth has been particularly strong, with a 3-year growth rate of 97.20% and an estimated future rate of 79.84%.
Investor Confidence and Market Position
Chewy's stock is held by notable investors, including Baillie Gifford (Trades, Portfolio), Jim Simons, and Paul Tudor Jones (Trades, Portfolio), who hold 4.56%, 0.53%, and 0.25% of the shares respectively. This endorsement by high-profile investors underscores confidence in Chewy's business model and future prospects.
Competitive Landscape
When compared to its competitors like Vipshop Holdings Ltd (VIPS, Financial) with a market cap of $7.12 billion, Etsy Inc (ETSY, Financial) at $6.88 billion, and Maplebear Inc (CART, Financial) at $8.4 billion, Chewy stands out with a higher market capitalization and a more robust growth profile. This not only highlights Chewy's dominance in the e-commerce pet care sector but also its potential for further expansion and market share acquisition.
Conclusion: A Strong Buy?
In conclusion, Chewy Inc presents a compelling investment opportunity. Its current valuation, according to the GF Value, suggests that the stock is significantly undervalued. Coupled with strong profitability metrics, impressive growth rates, and solid investor backing, Chewy is well-positioned to continue its upward trajectory. Investors looking for exposure in the e-commerce and pet care industry should consider Chewy as a potentially lucrative addition to their portfolios.
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.
