Chewy, Inc.'s (NYSE:CHWY) Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Chewy, Inc.'s (NYSE:CHWY) future prospects. Chewy, Inc., together with its subsidiaries, engages in the pure play e-commerce business in the United States. With the latest financial year loss of US$74m and a trailing-twelve-month loss of US$55m, the US$13b market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on Chewy's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Chewy

Consensus from 21 of the American Online Retail analysts is that Chewy is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$23m in 2024. So, the company is predicted to breakeven approximately 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 61% year-on-year, on average, which signals high confidence from analysts. 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, however, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one aspect worth mentioning. Chewy currently has no debt on its balance sheet, which is quite unusual for a cash-burning growth company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

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 compiled a list of key aspects you should further research:

1. 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.
2. 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.
3. 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.