Chewy: A Pet-Friendly Investment

Now, growth stocks. They’re a bit like those exceptionally promising seedlings you nurture in the spring – full of potential, but requiring a fair bit of patience and, occasionally, a hefty dose of luck. For a while there, everything seemed to be shooting for the sun, valuations climbing to frankly improbable heights. It’s gotten to the point where finding a genuinely undervalued growth company feels a bit like searching for a sensible pair of shoes in a convention of cosplayers. But, occasionally, you stumble upon something…reasonable.

And that brings us to Chewy. Yes, that Chewy. The one that sends boxes of kibble and squeaky toys to your doorstep with alarming regularity. It’s an e-commerce provider for pet supplies, which, when you think about it, is a remarkably robust business model. People are remarkably devoted to their pets, and remarkably willing to spend money on them. It’s a devotion that, frankly, puts most human relationships to shame.

What sets Chewy apart isn’t just the sheer volume of pet products they shift, but the astonishing loyalty of their customers. They boast a net sales retention rate exceeding 100%. Now, that’s not just good, that’s bordering on spooky. It means existing customers aren’t just coming back for more; they’re actively increasing their spending. Those early adopters, the ones who bravely ventured into online pet supplies back in the early 2010s, are now dropping over $1,000 a year. A thousand dollars! You could buy a rather nice armchair with that money. Or a lot of catnip.

Much of this is down to their Autoship program, which accounts for a staggering 84% of sales. It’s brilliantly simple, really. You sign up, and the food and treats just keep arriving. It’s like having a tiny, furry, four-legged subscription service. This predictability is gold for Chewy, allowing them to manage inventory, reduce shipping costs, and generally become more efficient. They’re currently at a 5.4% adjusted EBITDA margin, and are aiming for 10%. Not bad for a company built on selling things pets chew on.

But Chewy isn’t resting on its laurels (or, more accurately, its dog beds). They’re expanding into pet healthcare, insurance, and even advertising. It’s a logical extension of their existing business, allowing them to ship prescription medications alongside the toys and treats. It’s a win-win: more convenience for pet owners, and higher margins for Chewy. It’s also likely to further cement customer loyalty, because, let’s face it, nobody wants to switch online retailers mid-medication.

Chewy is consistently attracting new customers while simultaneously coaxing more spending out of its existing ones, all anchored by its core retail operation. This should translate to solid revenue growth in the high single digits. More importantly, consistent improvements in operating margins are poised to accelerate earnings growth. Analysts are predicting a 23% jump in earnings per share this year, which, if accurate, is rather encouraging.

And here’s the really interesting bit. At under $25 a share, the stock trades at just 19 times 2026 earnings expectations. That’s not just reasonable; it’s downright attractive. For those of you with $50 to spare, a couple of shares might just be a very sensible investment. It’s a company that understands a simple truth: people love their pets, and they’re willing to pay for their happiness. And that, as any good market analyst will tell you, is a very solid foundation for a business.

2026-02-15 00:53

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