Chewy: A Modest Proposal

Let us speak frankly about Chewy (CHWY 0.26%). The market, you see, is often afflicted by a peculiar myopia, mistaking temporary setbacks for terminal decline. This, my friends, creates opportunities – opportunities for those with a discerning eye and a willingness to wade into the slightly murky waters of commerce. The current valuation, a mere 24 times forward earnings, is a positively begging price, considering its five-year average of 73. A discount, wouldn’t you agree? The price-to-sales ratio of 1.1, similarly, whispers of undervalued potential. It’s like finding a perfectly good samovar at a flea market – a treasure amidst the chipped porcelain.

Now, the stock hasn’t exactly been setting the exchanges ablaze, averaging annual losses of 21% over the last five years. A regrettable performance, to be sure. But consider this: even a slightly crooked path can lead to a worthwhile destination. One must simply possess the fortitude – and, naturally, a well-considered investment thesis – to see it through. Before entrusting your hard-earned currency to Chewy, one must assess the situation with the cold precision of a card sharp.

Chewy, at its core, is a purveyor of happiness – albeit in the form of kibble and catnip. It operates in the e-commerce realm, a landscape dominated by behemoths like Amazon.com and Walmart. These giants, naturally, cast long shadows. But Chewy, unlike some lesser ventures, has managed to not only survive but to… persist. Revenue, while not exactly skyrocketing, has been steadily, if modestly, increasing. A slow simmer, perhaps, but a simmer nonetheless.

The autoship service, a stroke of genuine ingenuity, is the engine driving this modest growth. Customers, bless their predictable hearts, require a constant supply of pet sustenance. This provides Chewy with a dependable revenue stream – a most comforting arrangement. And the expansion into pet insurance, veterinary telehealth, and prescriptions? A shrewd diversification – a bit like a resourceful merchant adding a new line of goods to his stall.

The recent third-quarter earnings report offered a few encouraging tidbits:

Revenue increased by 8.3% year over year, and earnings, too, saw a welcome uptick.
Net and gross profit margins have improved – a sign that someone is paying attention to the pennies.
Autoship revenue is growing at 5%, now constituting a substantial 84% of total sales. A veritable goldmine of recurring revenue!

But let us not overlook the intangible assets. Chewy has cultivated a remarkable degree of customer loyalty. Tales abound of condolence cards dispatched to grieving pet owners, of small acts of kindness that resonate far beyond the price of a bag of dog food. It’s a masterclass in customer relations – a touch of humanity in the often-soulless world of commerce. It seems that in this world, even a simple gesture of compassion can yield a surprising return.

A future paved with gold is, naturally, not guaranteed. But Chewy possesses a certain… resilience. It won’t be a high-flying growth stock, no. But I anticipate a steady, if unspectacular, trajectory. It stumbled after the pandemic-induced frenzy, as many did. But the numbers are improving – a promising sign. A bit like a well-maintained troika – not the fastest, perhaps, but reliable and capable of covering a considerable distance.

2026-01-28 14:22

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