Chewy Inc (CHWY, Financial), a leading player in the retail-cyclical sector, has experienced a notable stock price increase of 56.07% over the past three months, bringing its market capitalization to $12.29 billion. Despite a recent weekly dip of -3.04%, the company remains significantly undervalued with a current GF Value of $42.62, suggesting potential for further growth.
Company Overview
Founded in 2011 and later acquired by PetSmart in 2017, Chewy has carved out a niche as the largest e-commerce pet care retailer in the US. With a diverse product range including pet food, treats, pharmacy items, and hard goods like crates and leashes, Chewy generated impressive sales of $11.2 billion in 2023. The company's commitment to expanding its product lines and enhancing customer service has solidified its market position, making it a formidable player in the pet care industry.
Assessing Profitability
Chewy's Profitability Rank stands at 4/10. Although modest, the company shows promise with an Operating Margin of 0.15%, surpassing 29.83% of its peers. More impressively, its Return on Equity (ROE) is 19.22%, better than 80.83% of competitors, and its Return on Assets (ROA) at 2.82% outperforms 54.1% of the industry. However, its Return on Invested Capital (ROIC) of 1.31% suggests there is room for improvement in capital efficiency.
Growth Trajectory
Chewy's Growth Rank is an impressive 7/10. The company has demonstrated strong growth metrics, with a 3-Year Revenue Growth Rate per Share of 13.70% and a 5-Year Rate of 23.90%, indicating sustained revenue increases. Future revenue growth is estimated at 5.91%, reflecting cautious optimism about Chewy's expansion potential. Furthermore, its 3-Year EPS without NRI Growth Rate stands at a remarkable 97.20%, showcasing significant earnings growth.
Investor Confidence
Chewy's stock is held by notable investors, including Baillie Gifford (Trades, Portfolio), which owns 19,333,073 shares, representing 4.44% of the company. Other significant holders include Renaissance Technologies (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio), holding 0.58% and 0.13% of shares, respectively. This investor interest underscores confidence in Chewy's business model and future prospects.
Competitive Landscape
Chewy operates in a competitive market, with major players like Vipshop Holdings Ltd (VIPS, Financial), Etsy Inc (ETSY, Financial), and Maplebear Inc (CART, Financial) also vying for dominance in the retail-cyclical sector. Despite the stiff competition, Chewy's unique positioning and extensive product range allow it to maintain a strong market presence.
Conclusion
Chewy Inc's recent stock performance, coupled with its solid fundamentals, positions it well in the competitive e-commerce pet care market. The company's profitability, although not leading the industry, shows potential for improvement. With robust growth metrics and strong investor backing, Chewy is poised for continued success. Investors should consider the current undervaluation as a potential opportunity, keeping an eye on future financial results and market conditions that could influence the stock's trajectory.
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.
