Could Buying Chewy Today Set You Up for Life?

Chewy (CHWY 2.49%) is a company that pet parents may know well. It’s an online retailer of everything they need for their dogs, cats, fish, and other furry and not-so-furry friends. This has helped the company increase revenue, reach profitability, and grow that profit in recent years.

The stock performance hasn’t followed, as Chewy shares have slipped 36% over three years. I don’t see this as a reflection of the business – instead, I think Chewy was left behind as investors turned to popular investment themes such as artificial intelligence (AI) or favored broader e-commerce players such as Amazon.

All of this creates an opportunity for investors looking for an inexpensive, high-quality stock that may deliver over the long term. Could buying Chewy today set you up for life? Let’s find out.

Image source: Getty Images.

Becoming profitable and growing earnings

So, first, let’s take a quick look at Chewy’s business. The retailer offers a wide variety of products and services for your pet, from food and toys to prescription medication and health insurance. This has helped the company become profitable and grow earnings over the past five years.

CHWY Revenue (Annual) data by YCharts

What I like the most about Chewy is that it’s successfully built a loyal customer base. We can see this through the Autoship service – you can sign up for the automatic reorder and shipment of your favorite products to your doorstep. Now here’s the best part: Autoship sales make up more than 80% of Chewy’s net sales. This shows that customers keep coming back to the company, and this offers investors visibility on future sales.

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NYSE: CHWY

Chewy

Today’s Change

(-2.49%) $-0.65

Current Price

$25.42

Key Data Points

Market Cap

$11B

Day’s Range

$25.09 - $25.91

52wk Range

$23.06 - $48.62

Volume

193K

Avg Vol

8.4M

Gross Margin

28.58%

A new revenue stream

On top of this, Chewy has expanded steadily and reasonably over the past few years. The company opened an e-commerce platform for Canadian customers, and in the U.S., Chewy has been opening veterinary clinics. The vet clinics are a great idea because, through offering Chewy a way to reach a new audience, they represent an additional revenue stream. Importantly, the clinics also introduce these customers to the e-commerce site if they aren’t already familiar with it.

Meanwhile, Chewy trades for 16x forward earnings estimates – that’s close to its lowest level over the past three years.

Now, let’s return to our question: Could Chewy set you up for life? Chewy makes a great buy right now. The stock is reasonably priced, and the company has been establishing a solid track record of growth. Loyal customers are driving this growth, suggesting it will continue. All of these points are positive, and they should eventually push Chewy stock higher, even significantly higher.

Still, I don’t think that Chewy, on its own, will set you up for life, but as part of a diversified portfolio, it may help you along the path to wealth.