It's no secret we're in a bear market. 

Even despite the recent market surge and reports that inflation is slowing down, we clearly have more challenges ahead. Challenges that tend to make investors nervous and subsequently drive even the best stocks down. 

The good news is that this reaction can open up some fantastic investment opportunities-especially if you know where to look. There's good reason to think that Chewy (CHWY -0.24%) is one of those hidden gems.

Mother and child play with family pet.

Image source: Getty Images.

A little background first...

Chewy probably doesn't need much of an introduction; its brand recognition is a solid example of what brand recognition should be. But if you're not a customer, you might not know why this company is so ridiculously popular, so let's start there. 

Chewy is more than just another online pet store. The company offers over 45,000 items from more than 2,000 brands, including both third-party companies and Chewy's private label. Find something you love? Great news! Subscribe through the company's Autoship program, which offers discounts on items you want regularly shipped to your doorstep. 

The company also offers access to licensed veterinarians via text and video chat for a small fee (free if you're an Autoship customer). Plus there's free shipping on orders over $49, and outstanding 24/7 customer support to boot. It is the be-all and end-all of online shopping for your furry and feathered friends, and it's leading the way in a rapidly growing industry. 

How much growth, you ask? In 2021, the U.S. pet care industry was valued at $126.3 billion. Globally, that number jumps to $280 billion and is projected to reach $550 billion by 2032 . Chewy intends to capitalize on that growth, and has confirmed its plans to eventually go global.

Why all the fuss?

As part of the consumer staples segment, the pet care industry has historically been resistant to inflation and recessionary environments. But Chewy's stock has been in a slow and rocky decline since hitting its all-time high back in February of 2021. This is due to a few different factors, one of which is the slight yet ongoing slump we've seen in Chewy's growth margins, a slump that has caused the company to fall short of analysts' expectations on more than one occasion, even adjusting its own earnings projections to reflect the reduction. Active customers increased by just 2% in the second quarter for example, compared to the substantial 21% increase we saw back in Q2 of 2021. So, there's growth... but just barely.

And that has investors pulling back. 

But-and this is important-that slump is cyclical, a temporary hurdle in Chewy's long road of successes. The company continues to show steady growth despite the contracting economy, albeit at a slightly smaller rate, and its customer loyalty creates a stickiness that makes it hard to compete. Remember that Autoship program I mentioned earlier? It accounts for 73% of Chewy's $2.43 billion in second quarter net sales, a bright example of the benefits of Chewy's customer loyalty.

Total net sales were up by 13% year over year, and net sales per active customer grew to $462, up 14%. This is definitely less than the 26.8% year over year net sales gains seen in last year's second quarter. But: It's growth nonetheless, and indicative of Chewy's ability to weather the current macroeconomic storm. 

Why should I invest now? 

Wall Street predicts Chewy will meet or exceed the high-end of its most recent third-quarter projection of $2.46 billion in net sales. In that case, Chewy would not only meet current expectations but also surpass 2021 numbers by about 11%.

Add to that the recent partnership with Lemonade (LMND 2.62%) Pet as well as the company's new regional fulfillment centers, and there's plenty to be excited about. The Lemonade partnership will expand Chewy's existing CarePlus program, adding new pet insurance and wellness options for Chewy customers, beginning in the spring of 2023. This program doesn't replace Chewy's existing partnership with Trupanion; rather, it's intended to enhance Chewy's overall pet insurance options.

The regional fulfillment centers are part of Chewy's new freight service, designed to help the company combat supply chain challenges. The company expects these automated facilities will handle as much as a third of its outbound freight by late 2023.

All of this "good stuff" supports Chewy's mission of becoming the go-to place for pet parents and partners. Even with slowed growth in recent quarters, I see this as a valuable long-term buy with a promising growth runway. 

Right now, Chewy is still cheap, trading at just about $41 per share, or around 1.8 times sales, compared to its average of about 3.2. Those third quarter numbers come out in early December and if they're as good as analysts are projecting, expect this price to increase quickly. If you're thinking you'd like to add this one to your portfolio, now is a great time to do it.