Chewy (NYSE: CHWY) it’s a company that pet parents may know well. It is an online retailer of everything they need for their dogs, cats, fish, and other furry and non-furry friends. This has helped the company to increase its revenue, achieve profitability, and increase that profit in recent years.
The stock’s performance did not follow, as Chewy shares fell 36% in three years. I don’t see this as a business exposure — instead, I think Chewy got left behind as investors turned to popular investment themes like artificial intelligence (AI) or popular e-commerce players like Amazon.
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All of this creates an opportunity for investors looking for an inexpensive, high-quality stock that can deliver over the long term. Can buying a 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 drugs and health insurance. This has helped the company to become profitable and increase its revenue in the last five years.
What I love most about Chewy is that it has successfully built a loyal customer base. We can see this with the Autoship service — you can sign up for automatic reordering and shipping of your favorite products to your door. Now here’s the best part: Autoship sales make up over 80% of Chewy’s net sales. This shows that customers keep coming back to the company, and this gives investors visibility into future sales.
On top of this, Chewy has grown slowly and reasonably over the past few years. The company opened an e-commerce platform for Canadian customers, while in the US, Chewy has been opening veterinary clinics. Vet clinics are a good idea because, by giving Chewy a way to reach a new audience, they represent another source of income. Importantly, clinics also introduce these customers to an e-commerce website if they are not already familiar with it.
Meanwhile, Chewy trades at 16x forward earnings — that’s near its lowest level in the past three years.
Now, let’s get back to our question: Can 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 growth track record. Loyal customers are driving this growth, suggesting it will continue. All of these points are good, and should ultimately push Chewy stock higher, much higher.
Anyway, I don’t think Chewy, itselfit will set you up for the rest of your life, but as part of a diversified portfolio, it can help you on your way to wealth.
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Adria Cimino has positions in Amazon. The Motley Fool has positions and recommends Amazon and Chewy. The Motley Fool has a policy of disclosure.
Can Buying Chewy Today Change Your Life? was first published by The Motley Fool
