Shares of Chewy (CHWY, Financial) surged today after the online pet products retailer reported impressive earnings growth in its second-quarter financial results. The stock price rose by 14.62% to $29.64.
Chewy's (CHWY, Financial) revenue for Q2 increased by 2.6% to $2.86 billion, aligning with analyst estimates. Gross margin improved by 120 basis points to 29.5%, and operating expenses rose just 0.8%. This led to an operating profit of $32.1 million, compared to an operating loss of $16.7 million in the same period last year. Adjusted earnings per share increased from $0.15 to $0.24, significantly outperforming the consensus estimate of $0.01.
Despite a decline in active customers from 20.4 million to 20 million year-over-year, Chewy (CHWY, Financial) saw an increase in net sales per active customer from $532 to $565.
For the third quarter, Chewy (CHWY, Financial) expects revenue to grow by 3%-4%, reaching $2.84 billion-$2.86 billion. For the full year, the company forecasts revenue growth of 4%-6%, totaling $11.6 billion-$11.8 billion. Additionally, Chewy raised its adjusted EBITDA margin guidance for the full year from 4.1%-4.3% to 4.5%-4.7%.
From a valuation perspective, Chewy (CHWY, Financial) is currently trading with a price-to-earnings (P/E) ratio of 156, which is significantly higher than the industry average. The price-to-book (P/B) ratio stands at 20.03, indicating that the stock is trading at a premium to its book value. The company's GF Value is estimated at $42.63, which suggests that the stock is significantly undervalued at its current price.
Chewy (CHWY, Financial) shows strong financial strength with an Altman Z-score of 5.48, indicating a low probability of bankruptcy. The company also has a high Piotroski F-Score of 7, which implies a very healthy financial situation.
However, there are some warning signs. Chewy's (CHWY, Financial) return on invested capital (ROIC) is less than its weighted average cost of capital (WACC), which might indicate that the company is not capital efficient. Additionally, insider selling has been noted with five transactions in the past three months totaling 24,236,004 shares sold.
In terms of market performance, Chewy (CHWY, Financial) has shown a positive trend with a year-to-date price change of 22.64% and a 52-week high of $39.1. The stock has also seen a recent surge, with a 15.74% increase over the past four weeks.
Overall, Chewy (CHWY, Financial) demonstrates strong financial health and growth potential, supported by its recent earnings performance. However, investors should be mindful of the high valuation ratios and potential inefficiencies in capital utilization.
