In a climate where many growth stocks seem overpriced after several years of market increases, savvy investors may discover appealing opportunities among select companies. One standout in the e-commerce landscape is Chewy, a leading provider of pet supplies. As its share price currently hovers below $50, there are compelling reasons for potential investors to consider adding this stock to their portfolios.
Chewy has garnered significant customer loyalty, which is central to its business model. The company boasts a net sales retention rate exceeding 100%, indicating that customers acquired in one year tend to spend even more in subsequent years. For example, consumers who began purchasing from Chewy in the early 2010s are now averaging over $1,000 in annual spending.
A significant driver of this growth is Chewy’s Autoship program, which represented an impressive 84% of its total sales during the third quarter of 2025. This subscription model not only fosters predictable sales revenue but also aids in inventory management and shipping efficiency. As a result, Chewy has achieved a 5.4% adjusted EBITDA margin over the past year, with aspirations to reach a 10% margin in the long term.
Current market metrics highlight an attractive investment landscape for Chewy, with a market capitalization of $10 billion. The stock fluctuates within a range of $24.02 to $24.68 on the day, with a gross margin of 28.58%. Analysts anticipate a favorable earnings outlook as well, with a projected 23% growth in earnings per share for the current year.
Chewy is also expanding its business into pet healthcare, insurance, and advertising, promoting margin enhancement without substantially increasing operational costs for its retail segment. This diversification aligns seamlessly with its core operations, allowing Chewy to ship additional items like prescription medications alongside traditional retail products such as toys and treats. As a result, these initiatives are expected to further bolster customer loyalty and improve revenue retention rates, thereby fostering stable revenue growth in the high single digits.
Trading at around $24.23 a share, Chewy’s valuation stands at just 19 times projected earnings for 2026. This attractive valuation may warrant consideration, particularly for readers contemplating their entry into the investment arena. With a compelling growth trajectory and an emphasis on customer retention, Chewy presents itself as a noteworthy prospect for investors looking to capitalize on long-term successes in the e-commerce sector.
