Online pet retailer Chewy (CHWY 2.04%) is not yet considered a mainstream blue chip stock. It's not a high-flying technology stock. Nor does it make electric vehicles. Instead, it's a business dedicated to pets and pet parents. 

So investors may be surprised to read about Chewy's impressive growth rates and expanding profit margins. Those are just two factors that make this under-the-radar growth stock a buy-and-hold candidate for long-term investors. Let's look closer at the business to understand better why Chewy deserves a spot in your portfolio. 

A dog wearing antlers.

Image source: Getty Images.

Chewy is growing revenue and customers 

As I mentioned earlier, Chewy's sales have increased at an impressive rate. From 2016 to 2021, Chewy's sales grew from $900 million to $7.1 billion. It's an e-commerce company that sells many things your pets could need and want. Interestingly, revenue growth is driven on two fronts -- gaining new customers and increasing spending per customer.

In its most recent quarter ended Oct. 31, Chewy reported having 20.4 million active customers. That was 14.7% higher than the 17.8 million it had at the same time last year. Like other e-commerce businesses, Chewy has thrived since the pandemic onset as millions of folks looked to avoid shopping in person for fear of COVID-19. What's more, pet ownership increased as people sought companionship when human contact was discouraged. Fortunately for Chewy, pet ownership is typically a multi-year commitment. Folks who became new pet parents and Chewy customers during the pandemic could stick around for a long time.

Additionally, Chewy customers are spending more. Net sales per active customer increased to $419 in the third quarter, up by 15.4% from last year's same quarter. The $56 increase in spending per customer is the biggest in the company's history. Management is expertly observing customer shopping habits and introducing new products they desire. Chewy's private label catalog has quadrupled since 2018, and its branded products comprise a growing percentage of overall sales.

Chewy's pet health ambitions

Chewy has recently accelerated its push to become a more prominent player in the $35 billion pet health market. Already, it offers a service called Connect With a Vet, where pet parents can speak to a Chewy-provided veterinarian over the phone or online. The service is free for customers who sign up for Chewy's autoship program, which is similar to Amazon's subscribe and save feature. In the future, Chewy will offer the service for a per-use fee to non-autoship customers. That certainly enhances Chewy's customer value proposition and is an excellent reason for folks to stick with Chewy. 

To add to the pet health service category, Chewy announced that starting in the spring of 2022, it will begin offering a suite of unique pet health insurance through a partnership with Trupanion.

Chewy's stock is inexpensive 

To make a case for investing in Chewy more compelling, it's trading at a relatively low price. Chewy's price-to-sales ratio as of this writing is 2.7. That's less than half the price it was selling earlier in the year and near the lower end of its selling range in its brief history as a public company. The stock has fallen on hard times this year as investors are concerned how supply chain disruptions will hurt Chewy's sales and increase Chewy's costs in the near term.

However, looking back longer-term, Chewy has proven it can grow revenue and increase profit margins simultaneously -- gross profit margin expanded from 16.6% in 2016 to 25.5% in 2021. The short-term pain is an opportunity for long-term investors to buy this growth stock at an inexpensive price.