Is There Now an Opportunity in Chewy After Last Week's 3.7% Share Price Rise?

• Wondering if Chewy shares are actually a good buy or just riding on hype? You are not alone, as many investors are asking the same question while the pet e-commerce space evolves.
• Chewy’s stock has seen some swings lately, climbing 3.7% last week but still sitting about 9% lower over the past month. This hints at shifting views on its growth potential and risk.
• Much of this movement comes from news about competition in the online pet segment and recent product expansions, which have kept Chewy in the media spotlight. These developments are shaping how investors see the company’s long-term position within its industry.
• Right now, Chewy scores 3 out of 6 on our valuation checklist, marking it as undervalued on half of our core checks. Next, we will break down what those valuation methods mean for the stock. Stick around to see why the most insightful view of value might be one you have not yet considered.

Chewy delivered -1.2% 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

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and discounting them back to today’s dollars. This approach helps determine what Chewy might be worth based on the cash it is expected to generate, rather than just short-term earnings or market sentiment.

Chewy currently produces free cash flow of approximately $447 million. Analysts have projected this figure will grow substantially over the coming years, with estimates reaching $553 million by 2026, $882 million in 2028, and potentially up to $1.25 billion by 2030. After 2028, these numbers are extrapolated based on industry assumptions, providing a forecast view even when direct analyst predictions stop.

Based on these cash flow projections, the DCF model estimates Chewy’s fair value at $60.39 per share. With the current share price sitting about 43.3% below this intrinsic value, the analysis suggests that Chewy’s stock is significantly undervalued according to its long-term cash flow potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Chewy is undervalued by 43.3%. Track this in your watchlist or portfolio, or discover 895 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 (P/E)

The Price-to-Earnings (P/E) ratio is the preferred multiple for valuing established, profitable companies like Chewy, as it directly relates a company’s share price to its earnings. For investors, the P/E ratio helps determine how much they are paying today for a dollar of future profits.

However, not all P/E ratios are created equal. A higher P/E can sometimes be justified by superior growth prospects or lower risk, while lower ratios may signal more uncertain outlooks or industry headwinds. This is why it is critical to compare Chewy’s P/E ratio not just to the industry average, but also to its peers and its “Fair Ratio.”

Currently, Chewy trades at a 93.9x P/E. This stands far above both the Specialty Retail industry average of 16.6x and its peer group average of 21.9x. At first glance, this may suggest the stock is richly valued. However, Simply Wall St’s proprietary “Fair Ratio” for Chewy sits at 26.8x. This figure is calculated by blending expectations for Chewy’s growth, its profitability margins, market capitalization, and unique risk profile.

The advantage of the “Fair Ratio” over traditional benchmarks is that it precisely tailors what would be a reasonable multiple for Chewy’s specific characteristics, not just the averages of sometimes dissimilar companies or broader industry benchmarks. Because it incorporates future growth, competitive risks, and scale, it serves as a more comprehensive guide for fair value assessment.

Given Chewy’s actual P/E of 93.9x is considerably above its Fair Ratio of 26.8x, the stock appears overvalued by this metric.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1417 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 us introduce you to Narratives. A Narrative is a story you create that links your personal perspective on a company to concrete financial estimates, such as fair value, revenue forecasts, and profit margins. This provides real context for your investment decisions.

Narratives help you translate what you believe about Chewy (for example, optimism about its expanding vet clinics or caution around margin pressures from new investments) into specific financial forecasts and a resulting fair value. This approach makes your reasoning transparent and actionable. They are easy to build using the Simply Wall St Community page, a tool trusted by millions of investors. This means you can quickly turn your investment thesis into numbers and instantly see how the current price stacks up to your own valuation.

Best of all, Narratives update automatically as new company news or financial results are released, so your analysis remains current without extra work. For example, some investors might project a fair value as high as $52.00 if they believe expansion efforts will quickly boost profits, while others may set a lower target of just $33.00 if they are more cautious about margin trends and customer growth. With Narratives, you can easily compare your story-driven fair value to the market price and decide with confidence when to buy or sell.

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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