Does the Recent 14.7% Drop Signal Opportunity in Chewy Stock for 2025?

• Ever wondered whether Chewy’s current share price actually makes sense or if there is untapped value the market may be missing? Let’s take a closer look beneath the surface.
• Chewy’s stock climbed 24.3% over the past year but pulled back lately, down 14.7% in the last month. This could indicate opportunity or signal that new risks are unfolding.
• Recent headlines have focused on Chewy’s ongoing expansion into new services, such as veterinary telehealth and fresh pet food offerings. These initiatives have sparked speculation over its growth trajectory and are keeping investors and analysts attentive as the company adapts to evolving consumer trends outside its core pet supplies business.
• On our valuation scorecard, Chewy comes in at 3 out of 6 for signs of undervaluation. There is plenty to examine in these numbers, and at the end of this analysis, we will discuss a smarter way to assess valuation.

Chewy delivered 24.3% returns over the last year. See how this stacks up to the rest of the Specialty Retail industry.

Approach 1: Chewy Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This method relies on forecasting how much cash Chewy will generate in the coming years and assessing what those future dollars are worth now.

Currently, Chewy produces approximately $447 million in Free Cash Flow (FCF). Analysts have estimated FCF growth over the next five years, projecting it to reach $1,246 million by 2030. After the analyst provided forecasts, further projections up to 10 years are extrapolated to show continued growth. These ongoing increases in FCF suggest Chewy’s business is expected to become more cash-generative over time, reflecting its expansion initiatives and market adaptation.

Based on this DCF analysis, the estimated intrinsic value for Chewy's stock is $60.49 per share. This is around 44.3% higher than where the stock is currently priced, signaling a notable undervaluation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Chewy is undervalued by 44.3%. Track this in your watchlist or portfolio, or discover 831 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Chewy.

Approach 2: Chewy Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation tool for profitable companies like Chewy, as it gives investors a sense of how much they are paying for each dollar of the company's earnings. For businesses that have moved beyond early-stage losses, focusing on profits rather than sales or assets provides a clearer view of shareholder value.

It is important to remember that what counts as a "normal" or "fair" PE ratio depends on factors like the company's future earnings growth expectations, risks, and how stable its profits are. High-growth, less risky firms typically trade at higher PE ratios, while lower-growth or riskier companies often see lower multiples.

Chewy's current PE ratio stands at 92.55x, far above both the Specialty Retail industry average of 16.72x and the peer average of 23.06x. At first glance, this suggests that the stock is expensive compared to its sector and competitors. However, Simply Wall St’s proprietary Fair Ratio for Chewy is calculated to be 28.89x, a benchmark tailored to Chewy’s own growth outlook, profit margin, market cap, and risk profile.

The Fair Ratio is a more sophisticated yardstick than broad industry averages or peer multiples because it weighs Chewy's unique business characteristics rather than just making a direct comparison to other companies. This approach offers a more nuanced perspective by factoring in both upside potential and company-specific risks.

When we compare Chewy’s actual PE (92.55x) to its Fair Ratio (28.89x), the stock appears to be trading well above what its fundamentals suggest is “fair.” This points toward meaningful overvaluation at current prices.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1410 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Chewy Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a user’s story and perspective about a company, essentially the “why” behind the numbers, connecting your outlook on Chewy’s business (like its investments in vet clinics or new product launches) to your assumptions about its future revenue, earnings, profit margins, and ultimately to your personal estimate of fair value. On Simply Wall St’s Community page, investors can easily create, share, and adjust their own Narratives, using a tool that millions already trust. Narratives make deciding when to buy or sell more intuitive by showing how your Fair Value compares to the current market Price, and they update automatically as new news or results emerge, keeping your analysis fresh. For example, with Chewy, some investors see the expansion into vet care as a massive growth catalyst and assign a high fair value, while others focus on recent earnings pressure and rising costs, resulting in a much more cautious estimate. Your Narrative reflects what you believe is likely for Chewy’s future.

Do you think there's more to the story for Chewy? Head over to our Community to see what others are saying!

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.

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