The stock market got off to a good start this year, but it dropped following the start of the Iran war. The S&P 500 index lost 1% from the end of 2025 through March 11.
Individual stocks have performed both better and worse, of course. Chewy (CHWY +3.37%) falls into the latter category, its share price having dropped about 23% this year.
A sharp stock price decline doesn’t mean you should rush out and buy the shares, however. It’s important to look at Chewy’s long-term fundamentals and valuation before making that determination.
Image source: Getty Images.
Understanding the business
Chewy hasn’t been in existence for very long. It started in 2011.
The company sells pet products, supplies, and prescriptions solely online. Revenue was growing at a nice clip before the start of the COVID-19 pandemic, but the rate accelerated after pet adoption soared when people were forced to stay home.
Chewy’s revenue went from $4.8 billion in fiscal 2019 (ended Feb. 2, 2020) to $10.1 billion in fiscal 2022 (ended Jan. 29, 2023).
Today’s Change
(3.37%) $0.83
Current Price
$25.43
Key Data Points
Market Cap
$11B
Day’s Range
$24.91 – $25.73
52wk Range
$23.06 – $48.62
Volume
5
Avg Vol
7.9M
Gross Margin
28.58%
Naturally, this growth proved unsustainable as people’s lives returned to greater normality. Still, management has focused its attention on customer retention and additions, and it’s producing solid revenue gains.
Active customers (those who ordered a product or service within the last year) grew 4.9% year over year in the third quarter of fiscal 2025 (ended Nov. 2, 2025) to 21.2 million. Importantly, sales per active customer increased by the same percentage, to $595.
Revenue from Chewy’s recurring delivery service, which helps retain loyal customers and provides a stable revenue source, continued to rise, gaining 13.6% to $2.6 billion. Chewy produced solid, if not spectacular, revenue growth of 8.3%.
The valuation
It certainly looks like Chewy is moving in the right direction. However, despite this year’s price drop, the shares still look richly valued.
The stock has a price-to-earnings (P/E) ratio of 52. While that’s down from 68 at the end of 2025, it’s still expensive. Using the S&P 500 as a proxy for the market, the index has a P/E multiple of 29.
The market’s valuation reflects high-growth earnings expectations. Can Chewy meet them?
Is this a rare opportunity?
Perhaps Chewy’s revenue growth will accelerate as it pursues growth initiatives like opening its own veterinarian clinics, which management stated have gotten off to a good start.
But the market’s valuation suggests high hopes for growth. That means things need to go smoothly, or the stock price will disappoint.
That’s why I wouldn’t call this a once-in-a-lifetime opportunity, given the expensive stock valuation. Based on that, I think investors should pursue more obvious buying opportunities.
