Is it Time to Buy Chewy After the Company Delivers on Q1 Earnings? 3 Things for Investors to Consider

Online pet product retailer Chewy Inc. (CHWY) skyrocketed 30% last week after reporting an impressive first-quarter performance on both the top and bottom lines.

The company’s sales were up 3% to $2.88 billion, driven in part by growth in auto-ship orders of 6%. Meanwhile, improvements in net sales per active customer of 10% suggest that customers are spending more with the company.  

Profits improved in Q1 as well, with a gross margin of just under 30%. This was a 130 basis point improvement year over year. Key contributors here were better results from its higher-margin sponsored ads and a narrowed focus on pet healthcare products which inherently have higher margins. Lower costs associated with deliveries played a role as well.

All of this led to adjusted earnings of $0.31 a share, a 55% improvement year over year. EBITDA came out to $162.9 million, a 47% improvement itself. 

The company is expecting more growth in the current quarter, the forecast is for sales growth of 2-3% ($2.84 billion to $2.86 billion). Looking out further, the full-year guidance has been set at a range of $11.6 to $11.8 billion, which would be a growth rate of 4-6%. 

On the bottom line, Chewy is expecting EBITDA to improve somewhere between 4.1-4.3%, whereas it previously expected just 3.8%.

Along with all this, a $500 million stock buyback program was announced, landmarking the company’s first in history. 

Chewy Plus, the company’s paid membership program, is in beta testing. Meanwhile, its first Vet Care clinics in the US were just recently opened. The company is really starting to come into its own, and CHWY is showing it with a 43% gain over the past month alone. 

That said, is there still room to buy this stock after last week’s pump? We’ve taken a look at the opportunity in the VectorVest stock market software and see 3 things you need to weigh before making your next move.

CHWY May Have Poor Upside Potential and Safety, But Excellent Timing Earns the Stock a Buy

VectorVest is a proprietary stock rating system designed to save you time and stress while empowering you to win more trades. It boils down complex technical data into 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). These indicators give you everything you need to make emotionless, calculated decisions.

Interpretation is quick and easy as each rating sits on a scale of 0.00-2.00 with 1.00 being the average. To make things even easier you’re given a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. As for CHWY, here’s what we found:

• Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It offers far superior insights than the typical comparison of price to value alone. CHWY has a poor RV rating of 0.55.
• Poor Safety: The RS rating is a risk indicator computed from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. The RS rating of 0.61 is poor for CHWY.
• Excellent Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year. This is where things get interesting, as CHWY has an excellent RT rating of 1.61.

The overall VST rating of 1.10 is good for CHWY - enough to earn the stock a buy as the stock continues to climb higher and higher. 

However, we encourage you to take a moment to review this free stock analysis for deeper insights (including where to set your stop loss) before you make your next move. Transform your trading strategy for the better today!

Want These Types of Insights at Your Fingertips so You Can Win More Trades?

Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.

VectorVest advocates buying safe, undervalued stocks, rising in price. CHWY is up nearly 30% in the past week after delivering solid first-quarter results on the top and bottom line alongside a stock repurchase plan. The stock itself may have poor upside potential and safety, but excellent timing continues to drive it higher and higher.

Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!