Is It Time To Consider Buying Chewy, Inc. (NYSE:CHWY)?

Today we're going to take a look at the well-established Chewy, Inc. (NYSE:CHWY). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$40.52 and falling to the lows of US$23.58. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Chewy's current trading price of US$23.58 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Chewy’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Chewy

What's The Opportunity In Chewy?

Chewy appears to be overvalued by 32% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$23.58 on the market compared to my intrinsic value of $17.93. This means that the opportunity to buy Chewy at a good price has disappeared! Furthermore, Chewy’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Chewy?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Chewy's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CHWY’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CHWY should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CHWY for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for CHWY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 1 warning sign for Chewy and we think they deserve your attention.

If you are no longer interested in Chewy, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.