Chewy (NYSE:CHWY) adds US$1.5b to market cap in the past 7 days, though investors from three years ago are still down 68%

Chewy, Inc. (NYSE:CHWY) shareholders will doubtless be very grateful to see the share price up 65% in the last quarter. Meanwhile over the last three years the stock has dropped hard. Tragically, the share price declined 68% in that time. So it's good to see it climbing back up. After all, could be that the fall was overdone.

While the stock has risen 15% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for Chewy

While Chewy made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last three years, Chewy saw its revenue grow by 13% per year, compound. That's a pretty good rate of top-line growth. So some shareholders would be frustrated with the compound loss of 19% per year. The market must have had really high expectations to be disappointed with this progress. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Chewy in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 26% in the last year, Chewy shareholders lost 35%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Chewy is showing 1 warning sign in our investment analysis , you should know about...

Chewy is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com