Tough (NYSE: CHWY) is a company that pet owners can get to know well. It is an online retailer of everything you need for your dogs, cats, fish, and other furry and not-so-furry friends. This has helped the company grow revenue, achieve profitability, and grow those profits in recent years.
Stock performance hasn’t kept pace, as Chewy stock has fallen 36% in three years. I don’t see this as a reflection of the business; Instead, I think Chewy fell behind as investors turned to popular investment themes like artificial intelligence (AI) or favored broader e-commerce players like Amazon.
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All of this creates an opportunity for investors looking for high-quality, affordable stocks that can deliver long-term results. Could buying Chewy today set you up for life? Let’s find out.
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 medications and health insurance. This has helped the company become profitable and increase its profits over the past five years.
What I like most about Chewy is that it has successfully built a loyal customer base. We can see this through the auto-shipping service: you can sign up for ordering and auto-shipping of your favorite products right to your doorstep. Now comes the best part: Autoship sales account for more than 80% of Chewy’s net sales. This shows that customers continue to return to the company and gives investors visibility into future sales.
In addition to this, Chewy has expanded steadily and reasonably in recent years. The company opened an e-commerce platform for Canadian customers, and in the United States, Chewy has been opening veterinary clinics. Veterinary clinics are a great idea because, by offering Chewy a way to reach a new audience, they represent an additional source of income. Importantly, clinics also introduce these customers to the e-commerce site if they are not already familiar with it.
Meanwhile, Chewy is trading on forward earnings estimates of 16 times, which is near its lowest level in the last three years.
Now, back to our question: Could Chewy set you up for life? Chewy makes a great purchase right now. The stock is reasonably priced and the company has established a strong track record of growth. Loyal customers are driving this growth, suggesting it will continue. All of these points are positive and should eventually push Chewy stock higher, even significantly higher.