We feel now is a pretty good time to analyse Chewy, Inc.'s (NYSE:CHWY) business as it appears the company may be on the cusp of a considerable accomplishment. Chewy, Inc., together with its subsidiaries, engages in the pure-play e-commerce business in the United States. The US$40b market-cap company posted a loss in its most recent financial year of US$252m and a latest trailing-twelve-month loss of US$174m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Chewy will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Chewy is bordering on breakeven, according to the 15 American Online Retail analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$82m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 93% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Chewy's growth isn’t the focus of this broad overview, but, bear in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with Chewy is it currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. Oftentimes, losses exist only on paper but other times, it can be a red flag.
There are key fundamentals of Chewy which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Chewy, take a look at Chewy's company page on Simply Wall St. We've also put together a list of key factors you should look at:
- Valuation: What is Chewy worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Chewy is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Chewy’s board and the CEO’s background.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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