There are multiple reasons you might want to invest in shares of Chewy (CHWY +0.45%) stock. A key one, to me, is its valuation. Its recent forward-looking price-to-earnings (P/E) ratio of 24 is well below its five-year average of 73, and the recent price-to-sales ratio of 1.1 is well below the stock's five-year average of 1.4.
NYSE: CHWY
Key Data Points
The stock has not been a phenomenal performer lately, though, with its shares averaging annual losses of 21% over the past five years. Thus, you should be quite confident that it will be growing before you devote your hard-earned dollars to it. Let's take a closer look at why you might -- or might not -- want to invest in Chewy.
Image source: Getty Images.
Chewy is primarily an e-commerce business, specializing in products and services for pets. When you think e-commerce, you probably think of Amazon.com, and Amazon has indeed been a rival for a long time, as has Walmart. But they have not killed off Chewy -- whose revenue has been growing -- at a slow but steady pace.
One growth driver has been its autoship service, permitting customers to set up subscriptions for items such as dog food or cat litter. These give Chewy more dependable revenue. Chewy is also expanding into pet insurance, veterinary telehealth, and pet prescriptions.
Chewy's third-quarter earnings report featured:
- Revenue up 8.3% year over year, and increased earnings, too.
- Increased net and gross profit margins.
- Autoship revenue growing by 5% and making up about 84% of total sales.
Another plus for Chewy is customer loyalty. There are many stories of customers being bowled over when the company sent condolence cards for pets that passed away, or offered other acts of kindness.
A rosy future isn't guaranteed for Chewy, but its prospects are promising. It's not going to be a high-flying growth stock, but I expect it will keep growing over time. It has struggled in recent years, especially after boffo sales in the early years of the pandemic, but its numbers have been improving.
